Comment: Hedging comparison betwene Lehman and Bear Stearn

Lehman - strong hedging --Net credit exposure 34.1 bil of OTC deritivatives asset in 07, vs 15.9 bil in 06; where interest rate, currency, and CDS 21.7 bil in 07, vs 8.8 in 06. asset are realized gain, not noational amount. In 2007, it increased CDS protection by approximately 4 bil of gains, reflection of bringing down gross writedown 5.4 bil to just $2 bil of net writedown ( 60% heding ratio). --unrelized level III net derivative gains are 1.58 bil vs 2.663 bil of M and Asset Backed Secs in 07 (hedging ratio 60%) Bear Stearn - weak hedging --short in details. notional amount of derivatives 13.4 in 07 vs 8.74 in 06. 11 tril in 2007 falls into swaps (options, swaptions, caps, collars and floors) --net derivatives gain in 07 is 375 mil, non derivatives loss is 1.89 bil in 07 (20% hedging ratio) Merrill Lynch - aweful hedging --Unrealized net derivative loss in 07 is -7.7 bil vs -4.2 bil net loss in trading assets. --The contractual obgliation assets in the form of CDS is 3.8 bil, but its contratual oglibation liability in the form of CDS is 8.5 bil, net effect is negative CDS. --It has CDS exposure 19.9 bil to financial guarantor, net gain of 3.4 bil