William Tanona (Goldman Sachs): You are active on the CDO side and the warehouse side of that business. Can you share your thought process as it relates to that and what the trends you are seeing there in the overall business, as well as possibly even in the subprime space there?
Jeffrey N. Edwards: It was an active quarter for securitizations, both in the ABS space directly and in the CDO space broadly. CDOs, in addition to having an active ABS calendar, we saw attention in that business broadening out to other asset classes as well. I would point out that even during the most uncertain times during the quarter we were able to price transactions. We priced 28 CDO transactions in the quarter, 19 of them were ABS CDOs and more than 10 of those deals were in the first couple of weeks of March, so while it was a more difficult environment, we continued to see an ability to transact and to move volume. On the subprime business, while it was a difficult environment, we were able to increase origination volumes at First Franklin in the quarter. We had record volumes in both January and February. We did that in the background where we were enhancing our already strong underwriting standards. We rationalized our rate of products, eliminating certain products that were performing less well and we successfully raised coupon rates. We also saw during the quarter the first payment defaults at First Franklin, First Franklin-originated paper, fall steadily throughout the quarter. They started out and remain at a level far below the industry. The trends there show some signs of positiveness. While it is early to say anything oabout the second quarter, I just point out that we did our First Franklin securitization earlier in the week. It was a $2 billion securitization. We saw spreads tighter, across all tranches from where they were a month ago, as investors have begun to reengage.
Roger Freeman (Lehman Brothers): The online brokers have issued subdued outlooks with respect to the retail environment. Are you seeing some of those same trends in your business?
Jeffrey N. Edwards: The most important trend to point to in our business is continued good flows on the money funds, on the fund flow side, particularly among products going into the annuitized revenue products which were up $16 billion for the quarter. We continue to execute on our strategy of improving our platform, adding financial advisors, attracting assets, and we believe we will continue to drive steady growth as a result of that.
Roger Freeman (Lehman Brothers): You talked in your prepared comments about the high net worth initiative in Europe. Can you talk about where that initiative is, how early days that is there?
Jeffrey N. Edwards: We are at the early stages of the repositioning internationally of our ultra-high net worth client initiatives. I expect that the impact there will be more pronounced going forward. EMEA, we continue to focus on the U.K. and the Middle East in particular. In Asia we are seeing good growth in the platform broadly, but I would highlight two countries in particular. India, where we have been investing aggressively to increase our platform and Japan, where we have a joint venture with Mitsubishi UFJ and we have now added about 20 new financial advisors since that initiative begun in the second quarter of last year.
Roger Freeman (Lehman Brothers): Can you talk about the VAR during the quarter, or at least directionally from the fourth quarter?
Jeffrey N. Edwards: You will see it in our Q, but directionally it will not surprise you. I do not think that it will be up, consistent with the performance in our trading businesses. We have talked for some time about our strategy of adding capabilities, both people and technology to support growth and risk taking. That risk taking is evident in the results and you will see the VAR reflect that as well.
James Mitchell (Buckingham Research): You did see choppy markets late February/early March. Can you comment on whether you saw your results weaken in March, considering that you had a record level on the proprietary side?
Jeffrey N. Edwards: We saw a balance in our business across all three months. That suggests that there are some businesses, as you would expect in a portfolio that will perform better in different months. We saw that. The equity trading businesses were strongest in February, but March was almost as strong as February. That reflects all of our trading businesses. I do not want to particularly get into SRG on a month-by-month basis, but their performance did set a consecutive record. Part of that has been adding people in the business directly; part of it has been augmenting the people with appropriate technology. A key part is making sure we have appropriate risk management in place to support that effort. There is nothing that occurred in the quarter that caused us to question our risk management.
Douglas Sipkin (Wachovia): You provided in the press release $1.2 million remaining on the buyback authorization. Some limitations now come into play with the First Republic transaction. How do you think about re-upping that authorization subsequent to the closing and when some of those restrictions come off?
Jeffrey N. Edwards: We have announced three different authorizations over the course of the last three years. We have executed on them. We have regular dialog with our board about the level of repurchases. We intend to continue that dialog. We anticipate remaining active. There will be some constraints during the coming quarter or quarters around that that are specifically related to the First Republic acquisition. We will abide by those restrictions during those periods.
Douglas Sipkin (Wachovia): You have been overcapitalized; the BlackRock transaction just augmented that. Subsequent to some of these acquisitions and the buybacks, after that transaction closes, how are you thinking about your relative overcapitalization?
Jeffrey N. Edwards: We have been focused on optimizing our capitalization for some period. There are many elements to that. The most important one is that we want to make sure we have appropriate capital to execute on our organic investment strategy, to be able to look at inorganic opportunities as appropriate and to drive higher revenues and higher earnings. That remains the primary focus of our focus on capital. When we have the opportunity, when as a result of our balance sheet efficiency initiatives we feel we have excess capital that we can return to shareholders, either through dividends or through share buybacks, we will look to continue to do that. At this point we anticipate remaining active and will update people on a quarterly basis on that.
Douglas Sipkin (Wachovia): This is the first quarter since you have made the First Franklin acquisition. What potential of your securitization was funded by your own originations this quarter?
Jeffrey N. Edwards: I do not have the number. Part of the strategic thinking behind First Franklin was that it provides us an ability to control our origination. That gives us both more insight into trends at an earlier level, which allows us to better risk manage our activities and it allows us to control our underwriting standards and pricing standards better. In the first quarter, as a new acquisition, there was a period of ramp up, such that we would expect the securitizations from First Franklin going forward to be at a more regular pace than we saw in the first quarter. Going forward, we still expect correspondent activity to be important. We can be much more selective than we have been in the past as to who we correspond with. That will be to our benefit as well.
Douglas Sipkin (Wachovia): Initially when you first announced the transaction you said that it would be accretive. Does that still exist, given some of the turmoil you have seen in the marketplace?
Jeffrey N. Edwards: It is difficult to say exactly when that turning point will come, given the volatility we saw in the first quarter. Long term there is no question that the attractiveness of the acquisition remains intact as we described, with increasing origination volumes in a period where in general we think the market was in decline, we believe we will be able to it gain market share. We are able to hire talent, which will augment our position. The benefits of the origination and servicing platforms are intact. It is a more volatile period and it is more difficult to predict the exact quarter at which that transaction takes place.
Douglas Sipkin (Wachovia): A lot of the capacities are in the process of coming out of the industry. Will you consider making another move from an acquisition standpoint if the right opportunity presented itself in the mortgage space?
Jeffrey N. Edwards: We continue to look for opportunities to grow this business on a worldwide basis, we have talked a lot about our U.S. activities this quarter, but it is important to understand that our mortgage activities are part of a global initiative on our part. In the past quarters we have talked about some of the opportunities and the efforts and the contributions in both Europe and Asia. That continues to be an important part of our strategy. In the U.S., our focus right now is on executing the First Franklin acquisition, making sure that the integration continues to go seamlessly and maximizing the benefit of that platform.
Michael Hecht (Banc of America): You had a good, broad-based quarter with the strength in equity markets. What is driving the strength in equity linked or derivatives?
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