Michael J. Cavanagh - Chief Financial Officer James Dimon - Chairman of the Board, President, Chief Executive Officer

Glenn Schorr - UBS Guy Moszkowski - Merrill Lynch Mike Mayo - Deutsche Bank Betsy Graseck - Morgan Stanley William Tanona - Goldman Sachs Jeff Hart - Sandler O’Neill Meredith Whitney - Oppenheimer John McDonald - AllianceBernstein Ron Mandel - GIC

: : : : : : : : : Mr. Cavanagh, please go ahead, sir.

Cavanagh: : : : : : : : : : : : : : : : : : : : : : : : Working down the revenue components of the Investment Bank you see we had $1.7 billion of investment banking fees, the circled number over there, which is our second-highest quarterly performance of all time, so obviously we feel very, very pleased with the continued strength of our investment banking, corporate finance and advisory franchise, and you'll see some of the rankings on the next page. : Equity Markets, $1.1 billion, down a bit from a year ago total revenues and also in there about $150 million of benefit from widening of credit spread. : Equity Markets, $1.1 billion, down a bit from a year ago total revenues and also in there about $150 million of benefit from widening of credit spread. : : : : : : : : : : : : : : Level III assets, no major change; slight uptick from 6% overall to 7% or so, which you'll see more when we file our Q. : Level III assets, no major change; slight uptick from 6% overall to 7% or so, which you'll see more when we file our Q. : Level III assets, no major change; slight uptick from 6% overall to 7% or so, which you'll see more when we file our Q. : : : : : : : : : And at the bottom of the page, a repeat of some of the details of the de-risking that I talked about upfront. : And at the bottom of the page, a repeat of some of the details of the de-risking that I talked about upfront. : And at the bottom of the page, a repeat of some of the details of the de-risking that I talked about upfront. : And at the bottom of the page, a repeat of some of the details of the de-risking that I talked about upfront. : And at the bottom of the page, a repeat of some of the details of the de-risking that I talked about upfront. : And at the bottom of the page, a repeat of some of the details of the de-risking that I talked about upfront. : And at the bottom of the page, a repeat of some of the details of the de-risking that I talked about upfront. : : : : And lastly 15% growth in the servicing book. : And lastly 15% growth in the servicing book. : : : : : : : : : : : : : : : : : : : : In particular on the revenue side, I just want to point out, remember we talked about at the time of the Bank One merger the opportunity here to grow annualized investment banking revenues delivered to this customer base from something like $400 or $500 million annualized to $1 billion was our goal? This quarter we set a record there and with $270 million per quarter of investment banking revenues have exceeded that target for the first time. : In particular on the revenue side, I just want to point out, remember we talked about at the time of the Bank One merger the opportunity here to grow annualized investment banking revenues delivered to this customer base from something like $400 or $500 million annualized to $1 billion was our goal? This quarter we set a record there and with $270 million per quarter of investment banking revenues have exceeded that target for the first time. : In particular on the revenue side, I just want to point out, remember we talked about at the time of the Bank One merger the opportunity here to grow annualized investment banking revenues delivered to this customer base from something like $400 or $500 million annualized to $1 billion was our goal? This quarter we set a record there and with $270 million per quarter of investment banking revenues have exceeded that target for the first time. : : : : : : : : Private Bank revenues up very strongly, and we've continued to do what we need to do to continue to build what we think is a great business here. : : : : : : : : : : : : : : : : : : : : : : : : : : : Bear Stearns, as I said upfront, $500 million of after-tax merger costs remain to be booked could run up to $150 a quarter after tax in the third and fourth quarter and trend down from there. : So with that I wrap up the comments here, and Jamie and I will just take some questions. : So with that I wrap up the comments here, and Jamie and I will just take some questions. : So with that I wrap up the comments here, and Jamie and I will just take some questions. : So with that I wrap up the comments here, and Jamie and I will just take some questions.

: Glenn Schorr - UBS: I think you mentioned in the comments that Bear was a slight drag on the Investment Bank. I'm assuming you meant some form of P&L comment, but can you talk about the strength in investment banking and then particularly in FIC trading on JPMorgan versus Bear, and then maybe a little bit more on the color commentary by product? Michael J. Cavanagh: You know, we don't get - I mean, I flagged some of the - let's take it in two pieces. A little bit of drag means that just for the month of June, the Bear Stearns ongoing activities contributed somewhat to the marks we took in leveraged loans and mortgages as well as, you know, we basically have taken on expenses ahead of revenues, so a little bit of drag after tax related to that. All that's saying is the $400 million of after-tax profits in our Investment Bank could have been a couple of hundred million higher had it not been for including the Bear Stearns results in the second quarter. But, as we said, those results are going to trend to the positive. Beginning in the second half of the year, they'll be incrementally positive. And as we said, the areas of strength, as you'd expect, very strong results in rates, currencies, emerging markets, credit trading, so some areas really with standout performance. Glenn Schorr - UBS: But you can't help us with the breakdown of what was - it's going to be impossible going forward, but the breakdown between JPMorgan and Bear's contribution to the FIC line in the quarter? Michael J. Cavanagh: Oh, yeah. No, I wouldn't even think of it that way. I mean, we -

There was no contribution - very - almost no contribution to FIC in Bear in this quarter. Glenn Schorr - UBS: That's a great quarter then. And then maybe, you both touched on a drop but maybe as a follow up, is how'd you balance, Jamie, your outlook commentary in the text, which is realistic, I think, and then how you grow, because I never know what to root for in terms of growth in Cards and Retail at a time when credit's starting to break down. Obviously, you try to price for it, but maybe just comment on that.

When you look at the growth numbers in Retail, you know, the revenues are up 15%, and almost all categories are growing. Deposit accounts, investments - our mortgage share is up to 11%, and while right now that isn't very profitable, I would have pretty good hopes that that will be far more profitable down the road. And that's just opening branches and hiring salespeople and doing the things you always do. You know, some of the credit costs are - you could almost look at them as a sunk cost at this point. And Card, where actually spend is up 7% - but the way to look at it a little bit is we're gaining share in consumer and small business, albeit obviously, you know, sales themselves are down a little bit. So we're continuing to invest in marketing in that business just like any other business. We're not going to stop doing that because you have credit losses.

Your next question comes from Guy Moszkowski - Merrill Lynch. Guy Moszkowski - Merrill Lynch: I guess my first question is, as you think of kind of a waterfall where you're looking at initially $11 or $12 billion of book value in Bear Stearns, and you pay $1 billion and change for that. I know you've got a page that looks a little bit like this in your Appendix, I guess, Page 23. And you try to work down to the extraordinary gain of zero, within all of these transaction-related costs that add up to the difference between what their capital initially was and the lack of the gain or negative goodwill, how much of these transaction-related costs that you're talking about here are essentially reserved, hung up on the balance sheet, which over time, if not used, could work their way into earnings?

I think, Guy, the way to look at it is very little. That, you know, there are some reserves for litigation and taxes and things like that, but those are best estimates in the ordinary course now. They'll be changed over time if the expectations change, and most of the severance and real estate and stuff like that really is actual cost. We know the cost at this point. And then all the things related to the balance sheet, de-risking, deleveraging, conforming accounting, think of that as gone. Michael J. Cavanagh: Yes. And those operating losses are already spent.

Yes, there's nothing else there. Guy Moszkowski - Merrill Lynch: So de-risking and deleveraging costs essentially are realized losses on disposition of the portfolio?

Realized or just marked down. Michael J. Cavanagh: To appropriate values.

As at the rest of the company. Guy Moszkowski - Merrill Lynch: Okay, so you don't want us to think that some portion of this is essentially like traditional purchase accounting?

Absolutely not. Guy Moszkowski - Merrill Lynch: Well, on the home equity side, changing topics here completely, it sounds like you've lowered the guidance of what we might expect the loss rate to look like by year end to about $700 a quarter from $900 million a quarter, and I was wondering if you could elaborate a little bit on what trend lines it is that are giving you a little bit more comfort there?

Right. So one of the things Mike mentioned is that that number's come down a couple hundred million, but the expected loss of the subprime and prime is up by a couple hundred million, so it's kind of a wash in our eyes. It's just that you look at the latest numbers of delinquencies and roll rates, you know, people go from 30 days to 60 days to 90 days, it looks like it might be a little bit lower than it was before. It is very early. We do not know. It's June, and a lot of people could argue there's some seasonality in that, so - but it's a little ray of sunshine which, you know, it's okay to grab onto for now. Guy Moszkowski - Merrill Lynch: Right. But like you said, there's other clouds in a couple of other portfolios.

That's absolutely correct. Guy Moszkowski - Merrill Lynch: The point you made about actively hedging when you were talking on Page 7 about some of the various mortgage exposures, could you remind us what your monoline exposure looks like there and whether any of your actions this quarter included any write-downs to that?

There were no write-downs this quarter to monoline. There may have been some modest marks or something like that. I want to point out we've only showed the gross exposures. Some are hedged and some aren't hedged because we've always acknowledged that there are risks on both sides of that, and there is no real perfect hedge, as you well know. And some things like Alt-A really can't be hedged. And the monolines, you know, we took on some - I think we told you in the past that for JPMorgan alone, you know, unless there's an actual default, the risks are not high. We took on some additional risk from Bear Stearns. I would still make that statement, that the risks, you know, you're talking about, unless there's a major default of one of the major ones, that they're really not that high. There could be marks up or down a couple hundred million dollars, but we're not relying - we're relying a little bit more than we used to on the monolines for some of the things because Bear Stearns had some, but it's really not a major thing for us. I mean, put it this way, the worst case isn't that bad. Guy Moszkowski - Merrill Lynch: In the Investment Bank you mentioned the comp levels and comp ratio, and they do seem quite high, especially given that your result was actually quite strong, even with your charges. Your year-over-year fixed income results, for example, were actually up a little bit or, sorry, modestly down. But, I mean, really in very good shape. And so when I look at a 57% or so comp ratio, it just seems very, very high. Maybe you can give us a sense for what's driving that that's not recurring and where we ought to think about that ratio for the full year.

That ratio obviously is high, and I think it was a very healthy reserve relative to results. Ongoing, it should probably look a little bit more normal, and it's just reflective of how we think we need to pay people, etc., but, you know, obviously it was a fairly healthy addition this quarter. We don't want our people getting depressed, put it that way. We want to keep morale up. Guy Moszkowski - Merrill Lynch: Well, I certainly applaud that sentiment.

Exactly. Guy Moszkowski - Merrill Lynch: And then the final thing I'll ask you is on Basel II, obviously the pure investment banks are showing us TSE Basel II ratios at this point obviously very difficult to compare. What's your timetable for beginning to show us Basel II? Michael J. Cavanagh: Guy, we're working on that now. As you know, we're under the different regulatory regime for Basel II and examination of the investment banks, and we're hoping to be the first major bank to be approved to go into parallel run potentially as early as the fourth quarter of this year.

And our Basel II number as we currently see it would be very strong. And I think if we use the same rules and requirements that the investment banks use, it'd be even stronger than that. Guy Moszkowski - Merrill Lynch: And maybe you can give us a sense for how it would compare to those, you know, 12 percentage numbers that we're seeing from those guys.

I challenge those numbers, okay? I'm not sure that those investment banks are using true Basel II-type numbers, but we don't know the detail. Ours would be very strong, too. So we've just got to wait until it sorts out. Now you saw recently the Fed and the SEC have an agreement to be sharing stuff like that so there'll be some commonality down the road in how people do Basel II. I would question whether those Basel II numbers are the same as ours. Guy Moszkowski - Merrill Lynch: Any particular area in which you would question that?

No, but you just do your analysis of the facts.

Your next question comes from Mike Mayo - Deutsche Bank. Mike Mayo - Deutsche Bank: Can you elaborate more, you mentioned home equity might be a little bit better than you expected. You talked a lot about that at your Investor Day. But prime mortgage going from 48 basis points up to 91 basis points linked quarter, can you just elaborate more on what you're seeing there and why?

Mike, it's exactly the same risk factors and all the other things. It's high CLTV, high LTV, it's stated income, it's California, Florida, Arizona. And I agree with you, they're staggering numbers. You know, it might be higher because, you know, we have all the politicians telling people it's okay not to pay your mortgages. It's just really hard for us to tell. Our current expectation is those losses could triple from here. And we're prepared for that, and we will reserve for that appropriately going forward. Mike Mayo - Deutsche Bank: I'm sorry. Prime mortgage losses could go from 91 basis points to 270 basis points? Michael J. Cavanagh: Yes.

Yes, that's what I said. We had $100 million a quarter, and we could go up to $300 million a quarter. We don't [expect it to] happen next quarter, but if you look at current trends - and maybe we're being a little overly conservative - that could be $300 million a quarter some time in '09. For awhile, not forever. Mike Mayo - Deutsche Bank: That's a lot worse than you expected before, and now you're expecting home equity to be a little bit better, so how do you reconcile those two?

Mike, we don't. We can't. Mike Mayo - Deutsche Bank: And then unrealized securities losses, what are those or how much non-agency MBS do you have? Michael J. Cavanagh: So our total OCI, you know, deteriorated by about a billion dollars in the quarter to be - if that's the question, Mike.

Non-agency MBS where? Mike Mayo - Deutsche Bank: Firm wide, just because of the decline in value.

Okay, I think if you looked at non-agency MBS, that is the number we're talking about at prime, which is held both in Retail and in Corporate, that is non-agency [whole] loans, most jumbo whole loans. Mike Mayo - Deutsche Bank: How about securities?

Very little. Very little other securities which are non-agency. There's some. You know, we buy and sell securities all the time. I mean, we bought some credit card BBB loans, and we've bought some CLOs and, you know, we have a huge portfolio we try to manage for total return. Mike Mayo - Deutsche Bank: And just to reconcile two other comments. You said continued lower investment banking results, but on the other hand Bear's contribution should get a lot better. So what are you thinking about going forward that might be a drag?

Yeah, so Bear, what we hope to see is that, you know, it'll be a positive contribution next quarter and build up to, you know, some time in '09 to $250 million a quarter. And the underlying results are outstanding. I mean, the trading results, the investment banking results, I mean, really outstanding. And if you talk to clients, I think they'd be very happy with us across the board. But you have to look at the environment today and just assume it's going to continue for awhile. There are still assets we want to get down. There's a lot of risk in holding syndicated loans and mortgages. You know, the values are much better because they're already been written down so much. You know, Mike mentioned the average leveraged loan is now $0.80 on the dollar. But in an environment like this, we assume that as we sell stuff, hedge stuff, that it, you know, we will probably have to pay a little bit more going forward. Eventually that will end, and you'll get the real underlying results. And the only other thing in there, because we do have a lot of credit exposure, which is very idiosyncratic. You have rate reserves, but, you know, you have some big surprise in a credit loan somewhere, you know, that could cost us. And we should be prepared for that, too. Mike Mayo - Deutsche Bank: Last question, mergers? I think you've been waiting your whole life for this environment or planning for it, so what is the impediment to you pursuing a merger right now in the Retail Banking side? Is it lack of willingness of sellers and boards? Is it the mark-to-market accounting? Is it the lack of your willingness?

I think the mark-to-market accounting makes it harder for a bank to buy a bank because you have to, you know, basically write the loans to a market value, but it does not make it impossible, certainly not for us because under the right circumstances we're sure we could raise the capital we need to do it, but it does make it harder. And, you know, this is a good environment. I would expect - I'm speaking generically now - that this will lead to more mergers over time. Nothing is impeding us, but it's not just up to us, as you pointed out. Mike Mayo - Deutsche Bank: If you close a deal by year end, do you still have to do the mark-to-market accounting on the loan book? Michael J. Cavanagh: Yes. That's effective immediately, right? That's not a -

I believe so, Mike. Michael J. Cavanagh: Effectively immediately and it's effective from now going forward, unless it gets changed. And we don't know if it'll be changed or not.

We wouldn't do a deal or not do a deal based upon pure accounting like that. We would do a deal or not do a deal based upon how much value we thought it added to shareholders. It just makes it harder, that's all.

Your next question comes from Betsy Graseck - Morgan Stanley. Betsy Graseck - Morgan Stanley: Just two questions, one on the Bear Stearns assets. You did sell down a dramatic amount relative to prior expectations. How much more do you anticipate reducing from here?

Well, it's not, you know, I wouldn't look at it like they're Bear Stearns assets anymore because these books are combined and run by a consolidated management team at this point, but I think if you look at the assets that Mike spoke about - mortgages, leveraged finance, and obviously some other categories that we didn't spend time on they'll be coming down over time. Betsy Graseck - Morgan Stanley: And as you executed that selldown of assets, did that at all help the trading line? I mean, I know you indicated that there wasn't much in Bear Stearns' operating business in your trading line, but I'm wondering if there was any, gain on sale given where rates had gone during the quarter that may have helped out that line at all. Michael J. Cavanagh: No. I would think of that as, you know, liquidation is a large contributor to consuming the book value that we were talking about earlier between write-downs and operating losses as we deleveraged. Betsy Graseck - Morgan Stanley: And then lastly I just wonder how you're thinking about the dividend policy given the very strong capital ratio that you ended the quarter at and well above, I think expectations.

Well, we applaud our friends at Wells Fargo, but we don't have quite that much guts going forward. We bear some more risk and, you know, we're not going to create the dividend until we see clear daylight.

Your next question comes from William Tanona - Goldman Sachs. William Tanona - Goldman Sachs: Just help me understand the kind of decision to increase the equity in the Investment Bank by $4 billion. If you looked at Bear Stearns, you know, prior to this deal, the equity was at $11.5 billion, and we all know that they were far greater levered. And, you know, looking at how much it took risk-weighted assets down, it's about 45%. If you just keep the same kind of leverage ratio, it kind of implies $6.5 billion of equity. So just trying to understand why you only allocated the $4 billion to the Investment Bank. Michael J. Cavanagh: Well, remember we took, Bill, we took equity up in anticipation somewhat of all this by $1 billion in the first quarter from $21 to $22. Remember also that our allocated equity is really just allocated common equity, so when you look at, you know, pure comparisons you've got to add a share of the non-common equity component to the firm's capital to get to the real kind of denominator when you do some of the calculations that are often done. So we go through all that. And I guess the one last thing to remember is that, when we do our own internal compares of capitalization to get to sort of stand-alone single A type of ratings, you've got to parse through versus our competitors that hold asset management businesses, private equity businesses, etc., inside their overall units. When doing a comparison of our Investment Banking unit to those, you have some parsing to do to arrive at what real pure comparisons look like. So on all that kind of basis, I think we get to a place that we feel like is appropriate, and we continue to watch it and look beyond just the nominal levels and look at some risk weightings and our sense of where risk really sits and compare to economic capital calculations internally as well.

I think it's good to point out [inaudible] capital buy because Mike mentioned, you know, our Tier 1 has a much higher component of common equity, which you could say is higher quality Tier 1. But across the board, you know, we try to be conservative. I always talk about quality of capital, which is maybe a peculiar concept, but loan loss reserves are very strong. You know, our BOLI/COLI is very strong. We're massively over reserved by a couple of billion dollars in our pension plans. We got out of the auto leasing business. Our card IO is very small. So it's really across the board. You know, you can look at all these things and call us pretty conservative. And we really believe in maintaining a strong balance sheet on all counts, not just [drawing] Tier 1 but all these other things I just mentioned. William Tanona - Goldman Sachs: And then I guess the follow-up question - and I've got to go back to it because I can't let you off that easy but helping us reconcile the commentary in terms of prime mortgages versus home equity. I mean, what is it precisely I know you can't obviously comment about the industry as a whole or choose not to - but in terms of our individual portfolio, what is it about your prime mortgage portfolio that you expect losses could potentially triple from here? You know, is it just the segments that you're in? Just trying to understand and reconcile that as well as, you know, the commentary between the home equity.

You know, you saw subprime go first, and then, on a slight lag, you saw home equity, and now in the lag you're seeing prime go. And it's exactly the same lost factors. But remember, the components of where we are in the states and all the stuff like this, it's very different. And we started doing more jumbos in '07, so a lot of that is - part of that's '07 vintage, which I think I told you at the time we're going to do and grow a balance sheet and gain share. And we were wrong. You know, we obviously wish we hadn't done it. So when you adjust for all of those things - vintages, CLTV, stated income, where it's done - that's what we're seeing. You know, it's very early in the loss curves, so the 300's just - it's just kind of rolling forward and projecting. You know, we hope it doesn't to there but it easily could. Michael J. Cavanagh: It's the same as our guidance on home equity was. It's where things could go depending on a set of views internally. William Tanona - Goldman Sachs: Yes, I mean, I guess I understand that. I just, you know, as you think about them potentially going up to 3 or 250 or whatever it may be and, you know, given your new guidance on home equity, which would also put that at 3, I guess it's just tough to imagine how home equity, given everything that's going on there with housing prices that that number could be as low if you do really expect prime to potentially double or triple from here.

At different locations, different vintages, different - but we understand your point. We disagree. It's that prime looks terrible, and we're sorry. There's nothing - we could say it eight times, but it looks terrible.

Your next question comes from Jeff Hart - Sandler O’Neill. Jeff Hart - Sandler O’Neill: Sticking with the prime mortgage for a second, when you talk about deterioration, I look at your prime mortgage portfolio and it's dominated by jumbo and Alt-A. Can you give us any color as to how the jumbo bucket's performing versus the Alt-A versus what I'll guess I'll call other prime mortgages that don't make up as big a part of your portfolio?

You know, I think - I don't know the number offhand. Mike, do you know the number? Michael J. Cavanagh: No. I mean, the way I might explain it, Jeff, is we've significant ratcheted back our underwriting standards in prime to be fundamentally much more of a traditional underwriting standards, much less stated income, LTVs from here that are targeted to not be in excess of the expected home price in given areas. So we're in some parts of the country max LTV currently at 65%, etc., etc. So when you layer that through and look at our portfolio split between the balances that we would continue to underwrite on our given standards and those that we wouldn't, for what we would continue to underwrite the existing credit performance is substantially lower than its overall level of 91 basis points of loss. So we feel confident that our current underwriting is wholly different than sort of the pig and the snake that we have just working through of what has been already underwritten with the risk factors that Jamie described. And I think one of the real drivers is home prices in some of the areas where we put on loans has come down so substantially that, you know, where we were in situations of, you know, relying on - rather, because it was prime, not relying on mortgage insurance and home values have dropped even below 80% original LTVs, we're taking losses. So that's, you know, those are some of the dynamics.

And I should just point out, though, what we see is if home equity goes we're going to be north of 3 by a little bit, and that the prime will be 220, 230, 240. You know, it may be temporary. It may just - it may hit that and then come down fairly quickly. Jeff Hart - Sandler O'Neill: But is prime going to that level a function of over three-quarters of your portfolio being jumbo and Alt-A versus just kind of the overall what you'd call housing market?

It may be. You know, I mean, that's all we have so that's - we don't have a great compare point, you know, because that's the preponderance of what we have in portfolio. Jeff Hart - Sandler O'Neill: Are you seeing better - I mean, from what you have in portfolio, are you seeing better performance away from jumbos?

We mostly have jumbos so - Michael J. Cavanagh: That's my point, Jeff. I don't have a good compare point inside of the portfolio because that's the preponderance of what we have actually on balance sheet. Conforming stuff obviously goes straight out the door to the agencies and doesn't stay on balance sheet.

I think the jumbos are more proportionately California, too, so that probably has a lot to do with it. Jeff Hart - Sandler O'Neill: And on the Commercial side of the business, we're seeing what's still pretty good loan growth. It's very nice loan growth. We're seeing really good credit quality as far as charge-offs go, but we're seeing you build reserves. Can you talk a little bit about whether that reserve build is in anticipation of troubles in commercial or just a function of how quickly you're growing your balances? Michael J. Cavanagh: I'd say it's two pieces. You know, there's a - we've been cautious related to commercial real estate, as we've talked about the Commercial Bank. But when you look at some small portions of the portfolio related to homebuilders, you saw in the first quarter really the more significant additions to reserves in the quarter. And that's really, you know, as time goes by and certain portions of the portfolio go under stress, they get downgraded and require incremental reserves. In aggregate, we feel confident about where we're putting on growth from here, but it's just the dynamics of degradation in certain sectors, particularly anything related to homebuilders.

By the way, the portfolio - and thanks for pointing it out - is very strong. I would think you should expect nonperformers to go up. We have never seen environments like this where that doesn't happen, even in a strong portfolio. And all of the growth, we really are comfortable. We see enormous opportunities to grow it and feel kind of like Wells felt about it, that there are a lot of clients, they need loans, they want to grow. There are a lot of municipalities - a lot of the growth is coming from government and not-for-profit, which is generally very secure, so we feel pretty good about it. But it almost has to deteriorate in an environment like this.

Your next question comes from Meredith Whitney - Oppenheimer. Meredith Whitney - Oppenheimer: I'm out of gas in terms of home equity and prime questions, but I just wanted to ask a separate question, which is on uninsured deposits and any type of market share moves and obviously important moves within that sector - you know, $2.5 trillion sector - and your thoughts on visuals of IndyMac and what's going on there, please.

Well, again, thanks for pointing out that our deposits in asset under management are like up 25% and TSS up 15% and Commercial Bank up 19%, which shows you, you know, kind of the power of this franchise over time. And, you know, we worry about us. You know, some - I think there are going to be issues. I think you've heard a lot of regulators talk about some of the issues with banks out there which may have more problems in their commercial real estate, and that'll cause, obviously, some depositors to be concerned about it. But we think we'll be a beneficiary of all that. Meredith Whitney - Oppenheimer: Anything in terms of just an industry comment?

You know, it's different all over the place, the competition for deposits right now. And we're not really chasing it, so you're not seeing growth in our deposits because we're chasing them. I think some of the people have really raised rates, not just uninsured but have raised rates because they need them. Meredith Whitney - Oppenheimer: What do you see in terms of, you know, any type of Northern Rock issue, where people are actively splitting accounts or anything like that so you're starting to see - I mean, how long would the line be where we'd start to see real market share moves?

Honestly, we don't know the answer to that question.

Your next question comes from John McDonald - AllianceBernstein. John McDonald - AllianceBernstein: Just two questions on potential accounting changes. I was wondering how much of a concern the potential changes in the QSPEs might be in terms of impact on capital ratios, and then also the potential changes in the credit card billing practices. Michael J. Cavanagh: Yes. So, I mean, just, first of all, we don't think the change in accounting - you know, remember you're talking about '09 and 2010 - would be consequential at all, though it'll could put hundreds of billions of dollars back on the balance sheet, the risk-weighted assets may be different. It's really not clear. But I think - and we may show you a lot more of this next time because it's come up many times, but we analyzed it, we don't think it's that big a deal for us. And we understand the regulator's points, but it's putting too much fear in people's eyes that is a little bit unjustified, particularly in our case. And the credit card changes, you know, it really depends. You know, we already got rid of double-cycle billing and we already got rid of [offers] default pricing or [offers] repricing at all. So the new changes coming up, depending on [how it] gets rolled out, could have an impact. It could be fairly material. A lot of it will be one shot, just one time, it'll hurt you for a year or something like that. But it really remains to be seen how it gets implemented and really how competitors react. Remember, you change price or something like that, everyone's going to - all the competitors react and do something bad in the first place. The interchange thing could also be [dramatic] though I would be surprised if you have pricing controls like that in the United States of America. John McDonald - AllianceBernstein: And the margin hit that you saw in credit card this quarter, you mentioned, you know, the credit quality is impacting it, but do you have any flexibility? You know, typically card issuers have some flexibility to raise pricing. Should that flow through over the next couple of quarters as you [reprice] folks? Michael J. Cavanagh: That would be some of our hope, John. You know, that potentially some response on our part to what we're seeing could be a factor in the second half of the year.

Your last question comes from Ron Mandel - GIC. Ron Mandel - GIC: In regard to FAS 140, I just saw your comment about not being that worried. You know, you have $75 billion or so of off balance sheet managed credit card loans. If that came back on, that would be about - which is, I think, is highly likely - would be about, you know, 50 basis points or so of capital.

It would be $50 billion of risk-weighted assets. Michael J. Cavanagh: Correct. So, you know, clearly, Ron, just remember, that is the accounting effect; that we would agree that that's probably likely, that credit card QSPs come on. So that $70 billion and maybe something less than $50 billion of RWA, I think, being conservative, come on, which obviously will eat into Tier 1 capital ratio. But the regulators get to take their view themselves and not necessarily follow accounting on how they're going to handle all that when they - and we just don't know enough yet on how that's all going to play out. If that were the outcome, we could handle it, obviously.

But also remember, Ron, we're retaining a lot of capital. Our dividend is low. We're retaining capital even at these low earning numbers. You know, we kind of expect that to continue. [inaudible] we're retaining capital. And you're talking about, you know, '09, 2010, 2011. So we'd be in very good shape for that. Ron Mandel - GIC: Have your conversations with regulators indicated that they will take a different approach than the accountants? Michael J. Cavanagh: It's too early to tell.

It's too early to tell, which is why I'm saying if you go through what I would consider almost the worst case, it's still not that big a deal. So, you know, so it hurts your Tier 1 ratio by 50 basis points, other ratios, who cares? It's just, you know, at one point it's just another number on a piece of paper. And, you know, we've got plenty of ways to raise capital or add preferred stock or reduce asset growth or something like that - Michael J. Cavanagh: Or recalibrate our capital targets because nothing fundamentally is changing as accounting changes, right? Ron Mandel - GIC: Right. And are there any third-party vehicles that you manage or otherwise that might - third-party related assets where you manage the conduit that might come on the balance sheet.

The conduit can go on the balance sheet, but that would barely impact capital because it's already included in capital Michael J. Cavanagh: On a risk-rated basis. And then there's a couple hundred billion of other forms of securitizations, VIEs, you know, totaling up. But like Jamie said, we can take you through at a future time. But there's plenty of business actions that we would see taking to make adjustments to likely make any impact from any of that very manageable.

Some of that would be irrational. We have absolutely no risk. We've got to put it in your balance sheet. So but even when I say it wouldn't matter, but remember we have a very, very forward-looking view of capital, so we already project our capital throughout '09, and we already know that we can handle all that stuff easily. It might change what we do elsewhere, but we already know we can handle that easily. Ron Mandel - GIC: And then I just had one last question. I guess I can't let go of the home equity, and that was at one point you indicated the amount of home equity loans as a percentage that was over 90% current loan to value. I think you said it was 22%, and I'm wondering if you have an updated figure.

That was over 100%. That was like they would go into negative equity, and I think the number - that was a forecast, right, to the end of the year? Michael J. Cavanagh: I think it was 10 and negative equity at the beginning, you know, on a forecasted - on a current basis going to potentially 20. So we're somewhere along that spectrum of 10 going to 20 in negative equity, I would say, Ron. But we can confirm that for you.

And what we really don't know, which is - you know, we can't really project - is how will people act who go negative equity who've been living in a home for three or four years, because you're hitting different vintages now. People who've actually been there, their kids are going to school. So it's a very different thing than maybe people who bought their homes on a 100% LTV in, you know, 2006 or 2007. That's possibly why you're seeing some improvement here. Ron Mandel - GIC: So you don't really have enough data to see how the people with no equity are going to act?

No, we're assuming they won't act well. Michael J. Cavanagh: But it's possible that they aren't as bad as we might expect. Thank you, everybody, for joining us. Look forward to next quarter. Take care.