Goldman Sachs 2007 Annual Report Download - page 110

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Notes to Consolidated Financial Statements
November 2006, respectively. Financial instruments owned
and pledged in connection with repurchase agreements, securities
lending agreements and other secured financings to counterparties
that did not have the right to sell or repledge are included in
“Financial instruments owned, at fair value” in the consolidated
statements of financial condition and were $156.92 billion and
$134.31 billion as of November 2007 and November 2006,
respectively. Other assets (primarily real estate and cash) owned
and pledged in connection with other secured financings to
counterparties that did not have the right to sell or repledge
were $5.86 billion and $5.34 billion as of November 2007 and
November 2006, respectively.
In addition to repurchase agreements and securities lending
agreements, the firm obtains secured funding through the use
of other arrangements. Other secured financings include
arrangements that are nonrecourse, that is, only the subsidiary
that executed the arrangement or a subsidiary guaranteeing the
arrangement is obligated to repay the financing. Other secured
financings consist of liabilities related to the firm’s William
Street program, consolidated variable interest entities,
collateralized central bank financings, transfers of financial
assets that are accounted for as financings rather than sales
under SFAS No. 140 (primarily pledged bank loans and mortgage
whole loans) and other structured financing arrangements.
Collateralized Transactions
The firm receives financial instruments as collateral, primarily
in connection with resale agreements, securities borrowed,
derivative transactions and customer margin loans. Such financial
instruments may include obligations of the U.S. government,
federal agencies, sovereigns and corporations, as well as equities
and convertibles.
In many cases, the firm is permitted to deliver or repledge these
financial instruments in connection with entering into repurchase
agreements, securities lending agreements and other secured
financings, collateralizing derivative transactions and meeting
firm or customer settlement requirements. As of November 2007
and November 2006, the fair value of financial instruments
received as collateral by the firm that it was permitted to deliver
or repledge was $891.05 billion and $746.08 billion, respectively,
of which the firm delivered or repledged $785.62 billion and
$639.87 billion, respectively.
The firm also pledges assets that it owns to counterparties who
may or may not have the right to deliver or repledge them.
Financial instruments owned and pledged to counterparties
that have the right to deliver or repledge are reported as “Financial
instruments owned and pledged as collateral, at fair value” in
the consolidated statements of financial condition and were
$46.14 billion and $36.00 billion as of November 2007 and
The following table sets forth the firm’s total assets and maximum exposure to loss associated with its significant variable interests
in consolidated VIEs where the firm does not hold a majority voting interest. The firm has aggregated consolidated VIEs based
on principal business activity, as reflected in the first column.
The table does not give effect to the benefit of any offsetting financial instruments that are held to mitigate risks related to the
firm’s interests in consolidated VIEs.
As of November
2007 2006
Maximum Maximum
Exposure Exposure
(in millions)
VIE Assets
(1) to Loss
(2) VIE Assets
(1) to Loss
(2)
Real estate, credit-related and other investing $2,118 $ 525 $3,077 $1,368
Municipal bond securitizations 1,959 1,959 2,715 2,715
CDOs, mortgage-backed and other asset-backed 604 109 1,537 20
Foreign exchange and commodities 300 329 433 340
Principal-protected notes 1,119 1,118 894 774
Total $6,100 $4,040 $8,656 $5,217
(1) Consolidated VIE assets include assets financed on a nonrecourse basis.
(2) Such amounts do not represent the anticipated losses in connection with these transactions.
108 Goldman Sachs 2007 Annual Report