Preliminary Gs Conference Call Transcript
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Preliminary Conference Call Transcript: Goldman Sachs (GS) Business Update Call March 20, 2009 <> Good morning ladies and gentlemen. My name is Gerald, and I will be your conference operator today. At this time, I would like to welcome everyone to the Goldman Sachs CFO Conference call. All lines have been placed on mute to [audio gap] [Operator Instructions] [audio gap] turn it over to Lucas van Praag, Head of Corporate Communications. Sir, you may begin. <> Thank you. Good morning everybody, welcome to the conference call today. During the call, we will answer questions and clarify some perceptions regarding Goldman Sachs' trading relationship with AIG. I'd like to remind you this call is only to discuss AIG. Questions related to earnings or to any other issues are not going to be answered. But you are, of course, welcome to call me after the call on 212-902-5400. Today's call may include forward-looking statements. These statements represent the firm's beliefs regarding future events by their nature of uncertain and outside the firm's control. This audiocast is copyrighted material of the Goldman Sachs Group Inc. and they're not to be duplicated if we produce rebroadcast without our consent. Now, let me turn the call over to David Viniar, our CFO. David? <> Thanks, Lucas, and good morning to everyone. We appreciate all of you taking the time to be on this call. Over the last several weeks and particularly in recent days, we've received a lot of questions concerning our trading relationship with AIG. We recognize that this is a complex set of issues and we thought it'd be helpful to provide a brief overview of the nature of interaction with AIG, including a general timeline that I hope will illustrate how we manage our risk. <> consistent with the way in which we manage counterparty risk more generally. I also want to provide an explanation of our exposure to AIG. Since the mid-1990s, Goldman Sachs has had a significant trading relationship with AIG. Our business with them stands in a number of their entities including many of their insurance subsidiaries, and it included multiple activities such as stock lending, foreign exchange, fixed income, futures and mortgage service. AIG was aAAA-rated company, one of the largest and considered one of the most sophisticated trading counterparts in the world. We established credit accounts with them commensurate with those extended to other major counterparts, including a willingness to do substantial trading volume with subject to collateral arrangements that were tightly managed. As we do with many other counterparty relationships, we limited our overall credit exposure to AIG through a combination of collateral and market hedges in order to protect ourselves against the potential inability of AIG to make good on its commitment. We established a predetermined hedging program which provided with aggregate exposure move above the certain threshold CDF's and other credit hedges would be obtained. This hedging is designed to keep our overall <> manageable levels. As part of our trading with AIG, we purchased protection on super-senior CDO risk. This protection was designed to hedge equivalent transactions executed with clients taking the other side of the same trace. In so doing, we serve as an intermediary in assisting our clients to express a defined view on the market. The net risk we were exposed to was consistent overall as a market intermediary rather than a proprietary market participant. In July 2007, we began to significantly markdown our super-senior CDO risk. Our rigorous commitment to mark-to-market accounting prompted us to do so on a basis which we believe was ahead of other institutions. This resulted in collateral disputes with AIG. Over subsequent weeks and months we continued to make collateral cost as the market deteriorated. While we collected significant amounts of collateral, there remains material gap between what we were paid and what we believed we owed. As was stated on multiple occasions, these gaps were hedged in full by the purchase of CDS and other risk mitigants, such that we had no material risk.
In mid-September, prior to the governments actions to save AIG, the majority of Goldman Sachs exposure to AIG was collateralized and the rest was covered through various risk mitigants. Our total exposure was roughly $10 billion, which predominantly included AIGFP, but also a number of other AIG legal entities. Against this, we held roughly $7.5 billion in collateral. The remainder was fully covered through hedges we purchased primarily through CDS. Again, as we have said before, we had no material economic exposure to AIG. In this regard, a list of AIG's cash flows to counterparties indicates little about credit exposure to the company. So let me turn to the three buckets AIG identified in which cash flows to counterparties. The first represented $2.6 billion in additional collateral that was called as market continued to deteriorate. This posting of collateral was consistent with the agreements we entered into with AIG. The second bucket was the $5.6 billion associated with Maiden Lane III. In mid-November, the Federal Reserve's established this financing entity to purchase the securities underlying certain CDS contracts and affect the cancellation of those contracts between AIG and counterparties. The Federal Reserve required that the counterparties delivered the cash funds to Maiden Lane in order to settle the CDS contract and to avoid any further collateral risk. Consequently the cash flow of -<> -- the cash flow $5.6 billion between Maiden Lane and Goldman Sachs reflected the Federal Reserve paying Goldman Sachs the face value of the securities, less the collateral held on those securities. We then spent the vast majority of the money we received to buy the cash funds from our counterparties in order to complete the settlement as required by the Federal Reserve. The third bucket AIG identified involved $4.8 billion related to securities lending. Financial institutions regularly exchange securities for cash to facilitate their liquidity needs. In this case, AIG gave Goldman Sachs $4.8 billion in securities, which were largely the highest quality, very liquid agency securities. Goldman Sachs in return gave $4.8 billion in cash to AIG. The $4.8 billion referenced in AIG's disclosure was simply the return of cash to Goldman Sachs in exchange for the return of securities AIG has posted. AIG repaid the money to Goldman Sachs and we returned the collateral to AIG. Since these securities were highly liquid and mark-to-market, had AIG not returned the cash, we would have sold the securities for roughly $4.8 billion. We stated consistently that Goldman Sachs did not have a significant economic exposure at AIG. AIG's disclosure of cash flow to counterparties does not in any way contradict that statement. In the middle of September it was clear that AIG would either be supported by the government and meet its obligations by making payments or posting collateral or it would sell. In the case of the latter, we would have collected our hedges and retain the collateral posted by AIG. That is why we are able to say that whether it failed or not, AIG would have had no material direct impact on Goldman Sachs. I hope this information has cleared up much of the confusion that existed. I would now be happy to answer any questions you have. Q&A Operator: Your first question comes from the miserable with L.A. Times.
In mid-September, prior to the governments actions to save AIG, the majority of Goldman Sachs exposure to AIG was collateralized and the rest was covered through various risk mitigants. Our total exposure was roughly $10 billion, which predominantly included AIGFP, but also a number of other AIG legal entities. Against this, we held roughly $7.5 billion in collateral. The remainder was fully covered through hedges we purchased primarily through CDS. Again, as we have said before, we had no material economic exposure to AIG. In this regard, a list of AIG's cash flows to counterparties indicates little about credit exposure to the company. So let me turn to the three buckets AIG identified in which cash flows to counterparties. The first represented $2.6 billion in additional collateral that was called as market continued to deteriorate. This posting of collateral was consistent with the agreements we entered into with AIG. The second bucket was the $5.6 billion associated with Maiden Lane III. In mid-November, the Federal Reserve's established this financing entity to purchase the securities underlying certain CDS contracts and affect the cancellation of those contracts between AIG and counterparties. The Federal Reserve required that the counterparties delivered the cash funds to Maiden Lane in order to settle the CDS contract and to avoid any further collateral risk. Consequently the cash flow of -<
: Yeah, thanks. What I'm wondering is if you were adequately hedged against any losses, why can't you take any discounts on what you got back from AIG in tax payer money? : Well, Jim, here is the way that's there. We have commercial contract with AIG. We entered into this contract on commercial terms. We were fully hedged with either as we said CBS on collateral, so we were not in our position to tackle off. We were -- we said we entered into this the terms if they had taken discount and we will take and loss for Goldman Sachs and frankly as I'm sure you know, we also -at Goldman Sachs and it's part of our responsibility is to protect that -- money and not lose it. And so should not comply with the commercial terms we have [indiscernible] were across the trends taken lots were there was no work coming. Operator: Your next question comes from Peter -- with Wall Street Journal.: Following on for Natt. [indiscernible] a loss if you look for we hedged? : I'm sorry, Peter I'll make sure I understood the question.
: I mean if you referring was they filed or not. And they just want a way that they have a page with single dime again with there impose any -- with you. You wouldn't have -- you would enough book any loss whatsoever, right? : Correct -- Correct. That's correct. But what I was saying I think the question was net on the transactions we did with them. We should have taken a discount, which I thought -- you would say essentially now we should have returned some of the collateralized and not capital in settlement of the transaction. If we had done math then we would have that --. But that we have been setting the transaction at a discount. Is that correct, or do you have anything about. That's right that we wouldn't want to do that because we work for it but didn't happen to take a look.: Well but I was saying I mean regardless of what you took there, are you already covered completely or saying anyway. So is even you took it at a discount you would have incurred on those hedges, right? : Yeah. We were fully covered with yes, with the collateralized and with the hedge. As what is the hedge is by themselves and what would I said is in September we had about 7.5 billion of collaterals and 2.5 billion of hedges that totaled $10 billion which is that we disclosure. If we had to take a discount on that Sun .5 billion of collateralized, as they said we want to sell of the -- we wanted to do give its back some of the collateralized, so it is a discount. Then we wouldn't be fully covered.: You said you got most of collateral before the collapse and therefore the rest was [indiscernible] mostly under that 2.5 which came of. That we would have taken a lot which came of with that. So you'd have taken a lot in the 2.5? You're saying? : You need a maybe I would say I must be confused that confusing [indiscernible] question was at a discount on the transaction which would have meant with current some of the collateral. And then we wouldn't be fully covered. If we had to return some of the collaterals.: Okay. All right. Okay, you're saying 10 billion what I would like to say 20 billion and so the IG -- total AIG exposure. What's the difference. : The 20 billion that was the first with the total notion analysis of the trade. So that was how much total protection we've got --. The $10 billion in a way represents -- represented once a deterioration in the market and so how much had to actually be covered by the production. 20 billion-budget total -- analysis of the trade that has been done.: Okay. And then before the collapse exactly how much collateral would be posted? -- [indiscernible] okay. And then, other than the super senior CDOs, David, it was there any other trade is going over with AIG. Having posted -- have you received collateral payments on those if it goes -- if you look at the AIG disclosure, about $40 million of [indiscernible] exposure on the market sector CDOs, that is less [indiscernible] 20 billion, what's the difference? : Yeah. We do have the other trades with AIG. As a super senior CDOs, we're largely transaction in all transactions that we've done with cash bond in the late that. We have in the ones that we [indiscernible] outstanding now and once that we are not [indiscernible] since that transaction. We have significance with them and derivatives on the other side. So there is really no cash bonds involved. And those are what are still outstanding now and that's way to [indiscernible].: And how much? How much coal at all? : We have roughly a little bit over $4.4 billion of collateral right now.: On that particular trade? : Yes.: Okay, thanks. : You're welcome. Operator: Your next question comes from [indiscernible].: Good morning, David. : Good morning, Christine.: Hi. Can you just clarifies some of the -- you say you have a $10 million of [indiscernible] 7.5 billion collateral. How was that collateral with super senior CDOs, what was the colonical that you have there? And once the liquidity agencies I think [indiscernible]
: Most of the colonical was against the super senior CDOs. There were some of the stock, the collateral date posted to out, with largely cash.: Okay. So [indiscernible] collateral, you have posted the new. Was cash -: Yeah. Mostly cash. As you know, we have collateral arrangements with hundreds of counterparties. On generally the colonical arrangements call for cash to be posted from one party to another.: You mean, cash dollars you don't need liquid-Treasuries [indiscernible] anything like that? : No, I mean roughly cash.: Okay. On them, that 4.4 billion of collateral, you still have now is the part of the 7.5 billion? : No. Well, [indiscernible] yes and no is the answer. Some of it ended up being part of the [indiscernible] transaction. So from if it went away and some of it feels the and then there was a 2.4 billion of a different collateral deposit. So it's a combination of both.: When do they post at a [indiscernible] 2.5 billion again, remaining, sorry. : From -- sometime between the middle of September and the end of the year.: Okay, okay. Why did you -- your national exposure to AIG [indiscernible], was that by design or was some of that far as it? theseactions were put on in largely in 2006 and prior little bit into thousand and seven, but almost all that was before to thousand and seven it was the very long time ago. AIG at the time if you remember was one of the largest strong as companies-In and their world, and they were very sophisticated or appeared to be a very sophisticated trading counterpart. The market was quite large at the time. And even despite that, we had collateral firms to protect ourselves. And so we thought that it was important into two given the size of the market and whom we are dealing with that even despite that prudence, we put into [indiscernible] collateral terms just-in-case which were now pretty glad we did.: So and to the degree you did then have the collateral you say you have CVS protected on AIG as a hedge? : Yes.: Who were your counterparties for that CVS? : It was really all of the large financial institutions around the U.S. and outside the U.S. And again, this is the way we work with other financial institutions. Those serious contracts largely had collateral posted against us. So we mitigate our credit risk with all of our counterparts as they usually do with us.: Okay. And then final question is, you have been saying that [indiscernible] Visibility Goldman Sachs would have been unaffected by failure that, when you did whatever the kinder scenario planning you did before the profitability of their failure by AIG, did you consider are the market reaction on different types of assets, and how bad did you anticipate the payback might be and what kind of production did you take against that? : Okay. So I want to be clear listing, that's the very good question. What we have said consistently is that we had no direct credit exposure to AIG. So just vis-a-visour trend actions with AIG, there would have been no credit losses at AIG itself. It's very clear to us and always clear to us that had AIG sales exceptionally given the timing, it would have been quite disrupted to the world's mark-to-market. Exactly how that would have affected things? It's hard to say. We would have had probably to spend money for pleasing some of the transactions, but there would have been a lot of volatility in the market. Other people wouldn't have replaced transaction as well. We would have been the major Counterparty, generally far us I mean there is A lot of volatility in the market is good for our trading business. However, it would not have been good for the financial market overall which is not necessarily for our business. And so, -exactly what would have happened. Again remembers the timing in the middle of September there was a lot of turmoil in the world financial markets. So we acquired [indiscernible]. That's what we were trying to position ourselves accordingly. But I don't want to mislead anyone. We had no direct explosure energy would not reflect directly their of course being a major -- in world financial markets. It would have affected [indiscernible] everyone else that somebody has to [indiscernible].: So you're not standing by the statement that Goldman Sachs would have been unaffected by the failure at the? : No body at Goldman Sachs has ever said that. Everyone at Goldman Sachs has said it would have not been effected directly in our explosure to them. Everyone in the entire world would have been effected by a failure AIG because it already reflected the world financial markets quite dramatically.
: Okay. One of your -- made the statement on any other [indiscernible] Goldman Sachs would have been unaffected by failure AIG? : Christina, okay let's me clarify --. I'm not saying that they would have been unaffected. I don't think there is any company the world that would have been unaffected by the failure of AIG because all of the world financial markets would have been effected. We had no direct exposure it would have been no loss -- the contract that we had with AIG.: Okay. Operator: Your next question comes from [indiscernible].: Hey David. : Good morning Joe.: Good morning. Here is most of my question has already been answered. But I'm curious you set a bit earlier and we have read about this before that the collateral dispute. Was the sort of our first sign that there will probably AIG I mean where you guys getting signs early on the problems that sort of their trading positions that are taking to met risk or whatever on the way Mark-to-market. Can you win that by that a bit. : Again, a very, very good question. That we can really omit before ourselves. We were very confident in where we were marking our books where I think everything we were doing in marking our book had proved to be correct in these were not with liquid securities. So it was not necessarily what I if like looking at the screen and see the price. So there were hard to mark. In some way given -- the wish we had been wrong. But we rely in the way we're marking our books, and we believe that the value of these additions was enabling and so we had disputes, we understood what is next for us. We could only see their side of the trade with us. We didn't know all the trade day might have with all the other counter parties. So I wouldn't say it was necessarily assigned to us there was something wrong at AIG. But it was a site for us to be concerned enough to make sure that we were fully hedged -- at the point, I mean and certainly not an expert or CFO or an investment backer. But if I was working with you guys, if I was at Goldman Sachs and started to notice problems like this, even if it is a AAA credit company, within you just sort of naturally is the company staying hard. Things are going very well here, did you guys have a scale back any of our trade or lesson business that you did with AIG because of a sense that maybe they won't be doing it properly? : Well, these were long dated great. So it was hard to unwind the trades. We were instead just protected, and I would say that after 2007, the amount of new business that we did scale back for [indiscernible]. And some of these disputes was that participated, it was a factor in the decision to scale back.: So can you -- last question regarding this. Can you give me some examples of how you did scale back? : We just put on [indiscernible].: All right. Okay. Thank you, David. : You're welcome. Operator: You next question comes from Andrew [indiscernible].: Hi, David. : Good morning, Andrew.: Good morning. Can you accept that it was your collateral [indiscernible] last year that really pushed AIG [indiscernible]. Can you just tell me, Goldman Sachs' [indiscernible]? : Let me answer the second question first. We don't think we did any thing else. We had commercial tons, it is our responsibility to our shareholders that to make sure that we are protecting ourselves. That's why we introduced contract, that's why we have collateral terms in the first place to make sure that we are protected. And all we did was call for the collateral that was due to us under the contract. So that's -- I don't think there is any guesses whatsoever. And -- yeah, that's right.: I mean, there's been a Board perception is that you're probably the biggest counterparty, you probably the biggest client. So do you accept that it was your collateral call [indiscernible]?
: Andrew, I don't know, if we would be a Santa Claus. We know as we said, we were in major counterpart that we did a lot of trading with them. We knew he had a lot of for the counterparts, we couldn't really tell what the size was. And I'm not [indiscernible] answer the question whether we put them over the head. We assume that we're getting our letter of costs and others at the same time. We don't know the size of theose collateral calls. What we know again is that, we were column for the collateral that was due to us under the contracts, and we had entered into the first place to make sure we are protected. you can look back with 2020 hindsight, [indiscernible] Goldman Sachs over this whole category of business, I mean, clearly it has done a great deal of damage to not any one, but many large companies since, when you look back, do you feel that this kind of business needs to be looked at in a fresh -: That is very broad and difficult question to answer. I think we like others did not come conclude year and a half [indiscernible] there are many positions we had on that we wish we didn't with 2020 hindsight. One of the things about that, being a CFO, that you always look back with the 2020 hindsight and wish you had more of everything that went well and less of everything that didn't go well. I would put this in that same category.: Okay. Thank you. : You're welcome. Operator: Your next question comes from [indiscernible] of Financial Times.: Hi, good morning. : Good morning.: I just wanted to clarify a couple of quick numbers. Firstly, of the 20 billion, how much that was invested or otherwise in eligible for maintenance rate? : I think round number $6 billion.: Okay. And the 4.4 billion you mentioned this collateral, is that -- was that posted there for certain timeframe or that is what you're holding now? : That's what we have now.: Okay. And can you tell me of the 10 billion collateral [indiscernible] 7.5 plus 2.5 that was posted, how much of that related to [indiscernible] portion? : Let me just clarify. 7.5 was collateral that was posted from energy to us. 2.5 billion -- hedges that we purchased in the open market.: So that 7.5 you took in September, but there was 33.5 September to also if you put six from September to December? : Okay. That's correct. So that's the 10 you're talking about.: Yes, that was the 10. : Yes, that's correct. Again, dollar is fundable, so it's hard for me to answer the question. But the east way to think about it we have 4.4 remaining now. So everything else was for the cash and 4.4 was [indiscernible] and I'd need to go back and make sure that I'm tracing the dollars correctly. But that's basically how it works.: Okay. Fine. : Welcome.: The other point I just wanted to clear up, in terms of how the ADI hypothetically, how the ADI gone on the [indiscernible] sort of systemic now, in which case you guys say you've been indirectly affected, I suppose the way I see potentially being [indiscernible] you couldn't replace that production the market of that line and so while you wouldn't have out of profit on the 10 billion, you still would have 2 billion of exposure on those --prepared stock protection or is that? : Right. That's what I was signed to describe some of that would when I think Christie had said question about would have affected about as opposed what have directly effected AIG, and we could have replace. You can always replace transactions it just would have been across. And so you'd have that probably would have been across the Goldman Sachs as sustained time and look
this is what we saw after doing this. At the same time, how this would have to replace transaction they would have been volatility the market and for our trading business that is usually good thing. So we would have been participant with other people replacing their transactions. We would have been participating in the market where volatility tends to be -- be good to Goldman Sachs. The net would just have been positive or negative is very, very difficult.: All right, thank you. : You're welcome. Operator: Your next question comes from Harry -- with Washington.: Hi David, How are you? : I'm good Harry. Thank you.: Good. I was trying to I was congested in what you were saying about the systemic risk about the barriers AIG was represented. Particularly at that time responsible thing to do would have been to lead the Treasury, or lead the authority. How many meetings does Lyolds [ph] have with [indiscernible] and what do they talk about? : As far as I know there were no meetings with [indiscernible]. I think why they said that. So that's what I would say. As far as our loading people the only thing I would tell you is big with our regulators regularly when we meet with our regulators we go through all of our big exposures all the time that's what I regulates [indiscernible] in our regulators posted regularly on that exposure we had with AIG.: Okay. Interesting. And did you get the satisfaction they were comfortable with that or did they give or after the you a pushback? : They -we have dialogue, we cover more exposures are, we talk about what we do to protect ourselves. And I thank they were pretty comfortable how we get protect ourselves.: Okay, interesting. And just on the number of well, when was the $4 billion of all our trial on the synthetic trade posted. Is that before or after the AIG --? : Do the combination. Some before and some after.: Okay, excellent. And the last question is one of course you had to deal with all of these. Rumors can often be destructive. Have there been any discussions management changes that changed the Goldman Sachs Wonderland? : No.: Okay. Quite excellent. Thank you very much. : You're welcome. -- question is to follow up from [indiscernible].: Yeah, thanks. I just wanted to get back to your original point on the -- you're having tax payer money. When the Goldman received the funds from TARP? : Middle of October.: And when weather dealings with AIG settled? : Well, the major lien transaction were basis -- we got payments from the government, were in the middle of November.: So at that point, just to clarify, your concern was if you took a launch, you would be not properly protecting the tax payer investment in Goldman Sachs? : We would not be protecting all of our shareholders investments in Goldman Sachs. We have to [indiscernible] taxpayers where -- I'd say, one of them, probably see many of them.: Okay, thanks. : You're welcome.
Operator: Your next question is a follow-up from [indiscernible] with Wall Street Journal.: Hi, just on the 4.4 billion of collateral. One could argue obviously the stuff paid after that was -- if it wasn't paid, it would have been a material hit to Goldman Sachs? : Well.: How much was that? : [indiscernible] paid 2.6 billion afterwards, after the government intervention. Some of which [indiscernible], some of which was not. And as collateral was paid at any point in time if they didn't pay it, we -- with any counterparts, we've always have on the risk, market moments won the risks. So whatever, and then initial date would be if they didn't pay, we either would go in and hedge, or we would just close of the transaction. In which case, we would always have the risk of one days market moments before we can close of the transaction.: I guess what my question is that, that if you had what percentage -- what amount of the 4.4 billion in collateral on the concerted stuff, which paid the [indiscernible], it was off that. If you're having the [indiscernible] that came after, because as you -- bankrupt, USA in the you would [indiscernible] with the hedge that at that time, I'm be able to just look at yourself and therefore there wouldn't be material hit. The scenes a bit of a stretch. : [indiscernible]. Go back to the number [indiscernible] the 2.6 billion was paid up after the government intervention.: Right. : The 2.6 billion was not paid on one that. It was paid over the course of middle of September to the end of December.: But [indiscernible] understanding, that was on the super senior. You're saying it's not, some of it wasn't. : Yes. Some of was, some was not. That was the total amount of collateral they paid after the government intervention. So it is not all paid on one day, it came in overtime. And at any point in time, if they had not been paying what's the collection that we do, we would have done one of the things. We would have continued to put on hedges. That would have cost us money to put on hedge. It cost us money to put on the hedges that we had put on or we could have closed out some of those transactions as we went on -might have cost us some money to replace but there would have been a lot of things going on the market is a fact.: But normally if you're writing CDS on AIG authors collectible, where would you get the hedges? : People -- first of all, we already had a lot of CDS, as you know and people always writing CDS on AIG. It's just a matter of price.: Okay. And then just back to that first question [indiscernible] I still don't get the math. If you had all these hedges on and that you had no material risk whatsoever to the AIG exposure. And then you got extra money from the government after the [indiscernible] net-net you guys probably made a gain on it a little bit, right? : No, no.: if you think about it, you had the hedges and you had -- then you got the collateral back and you still have the hedges there, which you have made a gain on? : The market was [indiscernible]. So the market continues to deteriorate, so they continue to owe us more collateral. The market wasn't statical till that period of time.: Okay. All right. Thanks. : You're welcome. Operator: Your next question is a follow-up on [indiscernible]: Hi, David, [indiscernible] I think you said the 4.4 billion or so much collateral you have now, : Correct.
: Okay, so what is that against exposure of how much, the 6 billion or [indiscernible] or is there more? : it down number $6 billion. We have uttered transactions on the various entities in AIG. But the bulk of it is the 6 billion in Synthetic.: Okay. And do you have any -- and did you, and first of all, on the CDS protection you have, how early and at what sort of levels were you able to buy that and did you actually make kind of [indiscernible] question, due you make a gain on that over the course of AIG's deterioration? : It was put on over the course of fall of 2007, 2008. So it's really put on over a fairly long period of time on some of it, as we put it on, if we made gains, and some of it for example, Madeleine was unwound and we still had the hedges, and they are credit actually redeemed to improve if we have losses. So it's kind of a mixture of gains and losses.: what do you say net-net if you had to try to estimate? : net-net, I would think we had a gain over the time. I don't think it was particularly material to Goldman Sachs, but net-net, I think we had a gain and I think that gain probably somewhat more than offset bid/offer spreads that we have to pay [indiscernible]: Okay. And then a final question, because a lot of the stuff was being worked out and you were getting during the time which sort of October, November time, is it factored all into the compensation decisions you're making at Goldman Sachs it's a fact that you were able to collect on some of this collateral? whatwe -- not at all. Because as I said because we were basically fully hedged and since there would have been no material effect on one way or the other. It really didn't effected by Goldman Sachs, didn't effectour P&L, didn't effect of revenues, didn't effect any -- performance of Goldman Sachs. And so therefore going to effect anyones conversation.: Thank you. Operator: Your necessary to follow up from [indiscernible].: Hey David. I shall -- wanted to jump on some of the -- has said if Lloyd one final thing --. Can you follow-up that I said that you mean What regulators at any point did you guys say to regulators earlier on before we -- comes to AIG that hey we -have making other, they are having a different vision of how these securities should be trading and talk about your disputes about our trends that might have given them any kind of hint that perhaps things might not be going well there? : We posted them on collaterals, right now again I think -- they were not seen only counterparty in the world which only had a collateral experience. I think there were larger it would in some way different than other but some of the securities were pretty hard to value at that time. -- we were pretty -- we were very confident in our marks, and our valuation in in the way which we have improved a lot but we will prudent -- everything okay. So we did [indiscernible] they did not.: Okay. And also what's your exposure currently I don't know that's already been said just want to make sure? : Again Our net exposure continue to be roughly 0 and we manage our exposure to them not like. So as being changed depending on where we are where collateral been posted [indiscernible] if markets move the other way we will take off the --.: Okay. All right, title David. : You're welcome. Operator: Your next question is a follow up from Harry -- with Wall Street Journal.: Hi Daivd. -- Operator: Your next question is a follow-up from Helen Thomas wth Financial Times.: Hello again. : Hello, Helen.: I just wanted to -- you talked about the collateral proceeds leading to September. [indiscernible] in the September to December period. I was wondering [indiscernible] of collateral that you were from AIG during that period, where are you continuing to know the gap that you could at least [indiscernible]?
: Yes, but they were small.: Okay. [indiscernible] a number on that, even it's about 2.6? : No. And today, they are really small to date.: Okay. And I mean, durable to put -- Billington numbers [indiscernible] in terms of what have been in this year in terms of collateral. What so been tested on the outstanding [indiscernible]? : The number I give you is roughly 4.4 billion. That's all we have today.: Okay. So that include what [indiscernible] in this year. : Correct.: Perfect. I'm just getting way back to the very first question that was asked. Why didn't Goldman Sachs take a discount? And [indiscernible] you have your rate interest expense. Why you ever ask to take a discount? Was that of a discount? : Well, we had ongoing negotiations with AIG. And they would periodically say that, well we like to settle this for less than -- we thought they are out. And our answer would always be no.: All right. Is that before September? : Before September and sometime after September. But that's not that unusual in commercial contracts where people will try and settle trade through their benefit. And it's kind of what we do in most of our transactions is most people want to settle for less than we think we do. We say no.: Great. I mean [indiscernible] September, one-end just negotiating cost, it was the government. And I'd say, what I'm asking is, was a discount with assets going into [indiscernible]? : No, I think from the very beginning, that was pretty much Operator: And your final question is a follow-up from [indiscernible] with the Wall Street Journal.: Hi, David, hello again. A quick question about what you were saying about the mortgage assets, because there was such a change in the mortgage market in 2007 and I think that overlaps with what you're talking about. So is all the mortgage assets underlying that synthetic deals that you talked about that you have hedged with AIG were in 2004 to early 2006 or were they later 2006 and 2007 when the subprime crisis really happened? : most of the transactions we did were done by the end of 2006 and there were a few smaller ones we have done in 2007, but it was almost all finished by the end of 2006.: so you felt like you have some pretty good visibility then on when the subprime crisis was really heading? : Well, really the subprime crisis started at the beginning of 2007. That's when things really started to turn down.: Right. And that is just when you're getting out of a lot of [indiscernible]? : Well, that's when we had finished -- we really did very little after that with that.: Okay. Okay. That's a very helpful. Thanks for being [indiscernible] : No problem. Operator: At the moment, do you have any closing remarks? : No we don't have other than thank everybody for listening in. We appreciate your time. : Let me add. Thank you again everybody is from my side and if you have any questions, please feel free to call me Lucas van Praag on the 212-902-5400. Thank you so much. Operator: Ladies and gentlemen, this does conclude the Goldman Sachs CFO conference call. You may now all disconnect.
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