Meredith Whitney (Oppenheimer): The earnings impact of the sales of Bloomberg and FDS in terms of operating earnings so what we net out of perspective earnings?
John Thain: This goes to why we picked these assets. In the case of Bloomberg although it is a valuable asset the way we accounted for it, we only picked up in the income the actual distributions that we made to us. Based upon our projections for those distributions and the income that we will receive on the loan we believe that is basically a wash. We do not think it will have any impact.
Meredith Whitney (Oppenheimer): What about FDS?
John Thain: In the case of FDS it is harder to answer that because we have not determined exactly what percentage of it we will continue to own. Because FDS itself is a relatively small revenue number the total is only 3% of GWM revenues, when we figure out what our percentage we are going to keep and then when we add back whatever amount we finance with the amount of the income would be on the loan, we do not think it is a material impact on our revenues or income.
Meredith Whitney (Oppenheimer): Given the fact that this is the fourth quarter of material write-down for the company and knowing what your reputation is you should be frustrated and why not at this point be the first to purge assets and get it over with. You bring people in you want to be long-term shareholders, stock go down, just start fresh, what is the push-back on that?
John Thain: First of all we are selling assets and so we have sold a lot of assets and we went through what the different ones were. To cut your leverage loan book in half is not the easiest thing to do in this environment. To cut our Alt-A positions down as much as we have and our sub-prime positions. The one place that there has not been a trade yet is in the CDO market and your question is a leading one and that would be something that we would be hopeful that we could do.
Meredith Whitney (Oppenheimer): Could you set a market by hitting whatever cash bid there is out there and just get it over with?
John Thain: No, I do not think we want to do dumb things and so we have been balanced in terms of what we sold and at what prices we sold them. We have not simply liquidated stuff at any price we could get. At some point some of the return profiles that people want you would not want us to sell the assets. We will continue to sell assets but in a way that makes sense from generating returns to our shareholders.
Patrick Pinschmidt (Morgan Stanley): On the Tier 1 capital ratio you are lower then your peers. Would you expect to move that ratio up a few percentage points over the next two quarters?
John Thain: In this environment for us to be around 10% is going to be fine given the mix of our business on Tier 1. First of all half of our business is the wealth management business which does not have much of any risk to it at all, and then the other half we are continuing to shrink. There are two other ways about how this ratio is calculated, one is because of the losses we have a large deferred tax asset and because of the way the calculation works we are not allowed to include all of that deferred tax asset into this calculation. The deferred tax asset is infinite so it lasts forever. We will eventually be able to use it. If we added back all of the deferred tax assets our Tier 1 ratio would be around 11%. We are in a comfortable spot right now. It is lower then some of our competitors but also some of our competitors have different businesses.
Patrick Pinschmidt (Morgan Stanley): If you do encounter another scenario where you have to take more write-downs and you need more capital what are your options in terms of potential asset sales?
John Thain: We have consistently for the last couple of quarters replaced any losses with new capital, more then that and we have said we will look at all of our different options. We a trillion dollar balance sheet, there are in fact other options. You have never heard of FDS and there are other options on our balance sheet.
Patrick Pinschmidt (Morgan Stanley): Can you give an update on the long-term debt funding profile?
Nelson Chai: We have $92 billion in our excess liquidity pool, and this covers the maturities over the next year by about 1.25x. If you look at the debt maturities that are going to come, the good news for us is that over the next it is going to substantially decline in terms of what our funding needs are as we go through the next couple of quarters. We were active in the first half of the year particularly in April, where we issued $37 billion in the first half of 2008, and you will see us continue to opportunistically look for opportunities to go to the market if you will. We have been mindful of our leverage out there and of our debt.
Glenn Schorr (UBS): The Bloomberg was thought to be a good cash flower and a good yield and a good earner for you. Why there is no material impact to revenues/earnings?
John Thain: We only pick up into income the actual distributions and so there is a lot more leverage on it now and they had significant distributions when they did that. The combination of the leverage on it based upon our expectations would have significantly reduced the distributions at least in the near-term.
Glenn Schorr (UBS): Could you comment on commercial?
John Thain: Our commercial book do not hedge that in the way that you are asking it because you can not short commercial, our commercial book for the most part not like CMBS, they are not securities. They are actual loans and the only way you can hedge, you can not short them, so the only way you can hedge them would be to CMDX and we think there is too much basis risk in that. That portfolio is a much more like an investment portfolio and one of the things we are doing is we are moving that into a third party fund format for that exact reason. We raised an Asia Pacific real estate fund, that fund is going to close at about $2.8 billion and we will move a significant portion of the securities into that. So far we have contributed about $1.5 billion and those just go in there as either loans or equity investments.
William Tanona (Goldman Sachs): The book value is $21.43 now but if you were to adjust it for the sale of both Bloomberg and FDS what would be the actual book value?
John Thain: He was hedging it because of the calculation, for us to calculate the number we have to make an assumption about the after-tax gain on FDS which we are trying to not tell you exactly what that is so that is why he said it was inline with what it would have been at the end of the first quarter.
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