Zero Hedge: Goldman Reduced Risky Assets by 70% in 2008

Wednesday, February 4, 2009

Goldman Reduced Risky Assets by 70% in 2008

Posted by Tyler Durden at 8:47 AM

As most financial firms were busy blaming each other and Lehman's bankruptcy for the upcoming $500,000 salary cap, Goldman was offloading bad assets (leveraged loans, residential and commercial real estate). In its presentation for the CS Financial Services conference, Goldman disclosed it had reduced over $53 billion in risky assets (that's funny cause over the duration of 2008, it had a buy rating on a vast majority of these assets - it would be preposterous to think the bank was taking advantage of gullible investors). The biggest category reduction was in the leveraged loan category which went from $43 billion to $8 billion. Good to see that all those rumors about Goldman selling loans short (and uncovered) to investors from the trading desk itself seem patently false. Also looks like on $24.1 billion of gross risky assets, the firm had net marks of only $6.2 billion, which means the average mark on "risky" assets, at least based on how Goldman marks its book, is 25 cents on the dollar (unless we are looking at this totally wrong).

Some more disclosures: Goldman seems to be really focused on the oh so important metrics of Tier 1 and Risk-to-Core capital. At year end Tier 1 was 15.6% as % of tangible common equity, while key risk exposure relative to capital had dropped from 224% a year prior to 56%. Presumably this is mostly due to the fact that capital is now not partners' capital but taxpayers' capital.

And lastly, the current funding model has also changed substantially: total disclosed funding at year end was $340 billion, split between secured ($119 billion), Unsecured ST ($53 billion) and Unsecured LT ($168 billion).