Goldman Responds To Zero Hedge Musings On The Segregation Of Cash And Derivative P&L

Yesterday, Zero Hedge summarized our thoughts on David Viniar's claim that it is impossible for Goldman to present derivative revenues on a standalone basis. Today, we provide Goldman the chance to "set the record straight" on the issue. Here is Goldman's side, courtesy of Lucas van Praag. We are surprised that Mr. van Praag focused on the more shallow issue of the daily P&L production which the firm provides for broad firm consumption: various Goldman groups under the FICC umbrella (and under the narrower "prop-trading" definition) have their own formats, and we are happy to present to our readers the non-mortgage daily P&Ls, if Goldman would be so kind as to provide it to us. Perhaps the delineation of derivative P&L is far more specific the CDS trading group (alas, we currently do not have access to that specific form P&L). Mr. van Praag, however, did not answer our inquiry as to whether the firm keeps track of cash and derivative P&Ls by strategy, which is a far more relevant issue. For the record, we are still 100% confident that a P&L track by strategy, and subsequent stripping of cash legs is a simple enough exercise, and one firm's self-respecting back office can complete such a task in minutes. 

Dear Tyler Durden:

Your comment on the FCIC's questions about our derivatives activities is interesting but, as the saying goes, several sandwiches short of a picnic.

The email you reproduce is not a smoking gun.  It is one of the nightly estimate emails sent from Controllers to senior management reflecting the days results broken out consistent with how we manage the business - integrating cash and derivative inventory.

As you can tell from the schedule, it does not differentiate cash from derivative inventory.

For example, the "Residential Credit" section speaks to ABX widening as the pnl driver which was hedges to the subprime and alt a loans held by that business.

The lines highlighted are:

Resi prime/Mortgage derivative - which consists of agency and non agency derivative bonds (not CDS) including IOs and Pos.

Property derivatives - which is trading in total return swaps or forward contracts on specific derivative products (Radar Logic's RPX and the main index - S&P/Case-Shiller Home Price Indices).

As David Viniar said during the FCIC hearing yesterday, we don't account for derivatives separately, we manage our combined cash and derivatives exposure because that represents our risk.

You know that risk is risk, no matter what form it comes in. The debate about discrete elements of it is a serious distraction from what should be the real focus.

Please be kind and set the record straight.

Thanks / Lucas