Goldman Sachs 2009 Annual Report Download - page 121

Goldman Sachs 2009 Annual Report
119
Notes to Consolidated Financial Statements
NOTE 4
Securitization Activities and
Variable Interest Entities
Securitization Activities
The  rm securitizes residential and commercial mortgages,
corporate bonds and other types of  nancial assets. The  rm
acts as underwriter of the bene cial interests that are sold to
investors. The  rm derecognizes  nancial assets transferred in
securitizations, provided it has relinquished control over such
assets. Transferred assets are accounted for at fair value prior
to securitization. Net revenues related to these underwriting
activities are recognized in connection with the sales of the
underlying bene cial interests to investors.
The  rm may have continuing involvement with transferred
assets, including: retaining interests in securitized  nancial
assets, primarily in the form of senior or subordinated
securities; retaining servicing rights; and purchasing senior or
subordinated securities in connection with secondary market-
making activities. Retained interests and other interests related
to the  rm’s continuing involvement are accounted for at fair
value and are included in “Trading assets, at fair value” in the
consolidated statements of  nancial condition. See Note2 for
additional information regarding fair value measurement.
During the year ended December2009, the  rm securitized
$48.58billion of  nancial assets in which the  rm had
continuing involvement, including $47.89billion of residential
mortgages, primarily in connection with government
agency securitizations, and $691million of other  nancial
assets. During the year ended November2008, the  rm
securitized $14.46billion of  nancial assets, including
$6.67billion of residential mortgages, $773million of
commercial mortgages, and $7.01billion of other  nancial
assets, primarily in connection with CLOs. During the year
ended November2007, the  rm securitized $81.40billion
of  nancial assets, including $24.95billion of residential
mortgages, $19.50billion of commercial mortgages,
and $36.95billion of other  nancial assets, primarily in
connection with CDOs and CLOs. During the one month
ended December2008, the  rm securitized $604million
of  nancial assets, including $557million of residential
mortgages and $47million of other  nancial assets. Cash
 ows received on retained interests were $507million,
$505million, $705million and $26million for the years
ended December2009, November2008 and November2007
and one month ended December2008,respectively.
The following table sets forth certain information related to
the  rm’s continuing involvement in securitization entities
to which the  rm sold assets, as well as the total outstanding
principal amount of transferred assets in which the  rm
has continuing involvement, as of December2009. The
outstanding principal amount set forth in the table below is
presented for the purpose of providing information about
the size of the securitization entities in which the  rm has
continuing involvement, and is not representative of the  rm’s
risk of loss. For retained or purchased interests, the  rm’s risk
of loss is limited to the fair value of these interests.
As of December2009 (1)
Outstanding Fair Value Fair Value
Principal of Retained of Purchased
(inmillions) Amount Interests Interests (2)
Residential
mortgage-backed
(3) $59,410 $3,956 $ 17
Commercial
mortgage-backed 11,643 56 96
Other asset-backed
(4) 17,768 93 54
Total $88,821 $4,105 $167
(1) As of December2009, fair value of other continuing involvement excludes
$1.04billion of purchased interests in securitization entities where the
 rm’s involvement was related to secondary market-making activities.
Continuing involvement also excludes derivative contracts that are used by
securitization entities to manage credit, interest rate or foreign exchange
risk. See Note3 for information on the  rm’s derivative contracts.
(2) Comprised of senior and subordinated interests purchased in connection
with secondary market-making activities in VIEs and QSPEs in which the
 rm also holds retained interests. In addition to these interests, the  rm
had other continuing involvement in the form of derivative transactions
and guarantees with certain nonconsolidated VIEs for which the carrying
value was a net liability of $87million as of December2009. The notional
amounts of these transactions are included in maximum exposure to loss in
the nonconsolidated VIE table below.
(3) Primarily consists of outstanding principal and retained interests related to
government agency QSPEs.
(4) Primarily consists of CDOs backed by corporate and mortgage obligations and
CLOs. Outstanding principal amount and fair value of retained interests include
$16.22billion and $72million, respectively, as of December2009 related to
VIEs which are also included in the nonconsolidated VIE table below.