Goldman Sachs 2012 Annual Report Download - page 157

Notes to Consolidated Financial Statements
Collateral Received and Pledged
The firm receives financial instruments (e.g., U.S.
government and federal agency, other sovereign and
corporate obligations, as well as equities and convertible
debentures) as collateral, primarily in connection with
resale agreements, securities borrowed, derivative
transactions and customer margin loans.
In many cases, the firm is permitted to deliver or repledge
these financial instruments when entering into repurchase
agreements and securities lending agreements, primarily in
connection with secured client financing activities. The firm
is also permitted to deliver or repledge these financial
instruments in connection with other secured financings,
collateralizing derivative transactions and meeting firm or
customer settlement requirements.
The table below presents financial instruments at fair value
received as collateral that were available to be delivered or
repledged and were delivered or repledged by the firm.
As of December
in millions 2012 2011
Collateral available to be delivered
or repledged $540,949 $622,926
Collateral that was delivered or repledged 397,652 454,604
The firm also pledges certain financial instruments owned,
at fair value in connection with repurchase agreements,
securities lending agreements and other secured financings,
and other assets (primarily real estate and cash) in
connection with other secured financings to counterparties
who may or may not have the right to deliver or repledge
them. The table below presents information about assets
pledged by the firm.
As of December
in millions 2012 2011
Financial instruments owned, at fair value
pledged to counterparties that:
Had the right to deliver or repledge $ 67,177 $ 53,989
Did not have the right to deliver or
repledge 120,980 110,949
Other assets pledged to counterparties that:
Did not have the right to deliver or
repledge 2,031 3,444
Note 10.
Securitization Activities
The firm securitizes residential and commercial mortgages,
corporate bonds, loans and other types of financial assets
by selling these assets to securitization vehicles (e.g., trusts,
corporate entities and limited liability companies) and acts
as underwriter of the beneficial interests that are sold to
investors. The firm’s residential mortgage securitizations
are substantially all in connection with government
agency securitizations.
Beneficial interests issued by securitization entities are debt
or equity securities that give the investors rights to receive
all or portions of specified cash inflows to a securitization
vehicle and include senior and subordinated shares of
principal, interest and/or other cash inflows. The proceeds
from the sale of beneficial interests are used to pay the
transferor for the financial assets sold to the securitization
vehicle or to purchase securities which serve as collateral.
The firm accounts for a securitization as a sale when it has
relinquished control over the transferred assets. Prior to
securitization, the firm accounts for assets pending transfer
at fair value and therefore does not typically recognize
significant gains or losses upon the transfer of assets. Net
revenues from underwriting activities are recognized in
connection with the sales of the underlying beneficial
interests to investors.
For transfers of assets that are not accounted for as sales,
the assets remain in “Financial instruments owned, at fair
value” and the transfer is accounted for as a collateralized
financing, with the related interest expense recognized over
the life of the transaction. See Notes 9 and 23 for further
information about collateralized financings and interest
expense, respectively.
The firm generally receives cash in exchange for the
transferred assets but may also have continuing
involvement with transferred assets, including ownership of
beneficial interests in securitized financial assets, primarily
in the form of senior or subordinated securities. The firm
may also purchase senior or subordinated securities issued
by securitization vehicles (which are typically VIEs) in
connection with secondary market-making activities.
Goldman Sachs 2012 Annual Report 155