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2 Highly Cnfidential New Yrk Fed Infrmatin Liquidity Stress Analysis: Assumptins Fixed Incme Finance OMO Eligible 0% Equity Finance 20% FRBNY t Exam000039

3 Highly Cnfidential New Yrk Fed Infrmatin SU~l1mary f Results Liquidity Surces as % f Liquidity Required Cushin / (Deficit) $ in billins Gldman Mrgan Lehman Merrill 101% 110% 78% 78% 1 11 (15) (22) VJ c:: ;5 :.0.S 75 fa Gldman Mrgan Lehman Merrill FRBNY t Exam000040

4 Highly Cnfidential New Yrk Fed Infrmatin Detailed Cash Flws 1 Unsecured Funding: amunt nt rlling Secured Funding: amunt nt rlling On-Barding and Other Cmmitments l Operating Cash Flws: net utflws (sum f lines 4a - 4c) l3 20 4a Prime Brkerage b Cllateral Payments c Derivatives/Margin Payment Mismatches Liquidity Surces (sum f lines 6a - 6c) a Brker Dealer Cash (available t fund BID utflws nly) b Parent Liquidity Pl (unrestricted) c Affiliated and Unaffiliated Bank Lines Cushin / (Deficit) 1 11 (18) (22) 8 Liquidity Surces / Liquidity Required (line 6 / line 5) 101% 110% 74% 78% 9 Secured Funding Outflw / Liquidity Surces 9a Secured Funding Outflw / Liquidity Surces line 2 / line %1 35%1 68%1 60% Discussin Pint: Reductin in Secured Funding Outflw 9b required t achieve a 33% rati in line 9a l 21 9c % Secured Funding> 30 days 2 10% Line 9b = line 2 - (line 6*-33) "Excludes OMO eligible securities fr all tirms; des nt include matched bk fr Mrgan because maturity structure has nt yet been prvided. Lehman % Secured Funding is >14 days. FRBNY t Exam000041

5 Highly Cnfidential New Yrk Fed Infrmatin Observatins and Cnclusins * Sund liquidity psitin. * Parent and brker / dealer liquidity pls are cmprised f high quality assets. * While Mrgan shws a liquidity * Lehman's weak liquidity psitin is * Merrill's weak liquidity psitin is cushin, the prepnderance f vernight I driven by its relatively large expsure t I driven by significant amunts f illiquid secured funding creates uncertainty vernight CP, cmbined with significant fixed incme assets as well as a large arund its ptential utflws. Mrgan vernight secured funding f less liquid matched bk that finances custmer cmpensates fr its higher risk with a assets. transactins. very large liquidity pl. * Liability structure is significantly term * Bth ne- and tw-ntch dwngrades * Similar t Mrgan, Merrill's equity funded: at 5/23/08, 69% f its nn-omo * Mrgan prjects significant utflws in wuld result in significant cllateral calls. financing structure appears t be mre eligible secured funding was greater than equity business in terms f bth secured cmplex and mre risky than Gldman's. 30 days and 49% f ttal funding was funding and prime brkerage. * Lehman recgnizes its vulnerabilities greater than 30 days. and is trying t reduce illiquid assets and * Merrill's liquidity pl is lw, a fact * Mrgan's equity financing structure is a extend maturities where pssible. At that Treasury Management des nt * Equity finance risks are nt transparent. ntable vulnerability, appearing t be 5/23/08, Lehman had 43% f its nn- acknwledge. Treasury Management Gldman's structure appears less mre cmplex and mre risky than OMO eligible secured liabilities maturing includes relatively illiquid surces f cmplex than peers, but Gldman Gldman's. At 6110/08, nly 19% f beynd 14 days. liquidity in its internal calculatins and acknwledges mre wrk is required in Mrgan's nn-omo eligible secured prjects significant reductins in assets this area. liabilities, bth fixed incme and equity, * Lehman shuld imprve its liquidity and custmer financing t arrive at a * Management cntinues t strive fr matured beynd 30 days. In April, we psitin by $15 billin. Its expsure t psitive utcme in its wn eyes. indicated t Mrgan that its equity rllver risk in nn-omo eligible lnger term funding and t add precisin financing structure was t shrt-term. secured funding represents a large draw t its calculatins f liquidity requirements. * We have n recmmendatins fr Gldman's liquidity management at this Mrgan respnded by reducing vernight n its liquidity surces (62%) and shuld equity funding frm rughly 85% t 66% be reduced by further extensins in between early April and mid-june. maturity n these liabilities, sales f the underlying assets r by increasing liquidity surces t mitigate the risk. time. * As Mrgan already maintains a very large liquidity pl and is implementing strategies t extend maturities n its secured liabilities, there is n need t recmmend changes t its liquidity strategy at this time. We wuld expect the result f these strategies t steadily increase its cushin ver the cming mnths. * Merrill needs t embrace cnservatism in its liquidity analysis and acknwledge that it needs t imprve its liquidity psitin. Merrill shuld imprve its liquidity psitin by $20 billin. Its vernight expsure t rllver risk in nn OMO eligible secured funding represents a large draw n its liquidity surces (60%) and shuld be reduced by further extensins in maturity n these liabilities, sales f the underlying assets r by increasing liquidity surces t mitigate the risk. FRBNY t Exam000042