Goldman Sachs (GS) Level 3 Assets Grow

November 12, 2007 11:14 AM EST

According to reports from Bloomberg, Goldman Sachs (NYSE: GS) held a larger percentage of hard-to-value 'Level 3' assets at the end of Q3 than embattled rivals Citigroup (NYSE: C) and Merrill Lynch (NYSE: MER)

Goldman Sachs' Level 3 assets accounted for 6.9% of the company's $1.05 trillion in assets, while Citigroup showed Level 3 assets of 5.57% and Merrill showed 2.5%.

Goldman has repeatedly denied rumors of large suprime writedowns, as others banks have bombarded investors with news of new multi-billion dollar writedowns.

Goldman showed $72 billion in Level 3 assets as of August 2007, of which Goldman bear economic exposure of $51 billion. Of the Level 3 assets, $41 billion is classified as Corporate and other debt obligations, which Goldman said includes non-prime residential mortgage whole loans and mortgage-backed securities of $1.82 billion and funded leveraged loans arising from capital market transactions of $6.80 billion.

The 33% increase in Goldman's Level 3 assets was due in large part to the freezing up of the LBO market, which left firms like Goldman holding the loans.

Under new FAS 157 rules, firm's like Goldman are required to disclose a breakdown of their asset valuations. Level 1 Assets are unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 Assets are quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; Level 3 assets are prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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