-146-                                         
          remaining 54 swaps (173 - 119), 9 were with counterparties that             
          did not ultimately hail from a G-10 or European Union country.              
          Many, if not most, of FNBC’s swaps with foreign counterparties              
          were with other dealers, who while not subject to U.S. bankruptcy           
          laws, were extremely well capitalized and were most unlikely to             
          default on their obligations.                                               
                    4.  Practicability of Accounting for Netting                      
               If a dealer had a legally enforceable netting agreement with           
          a counterparty, then it would be preferable for the dealer to               
          calculate the credit exposure for all of the swaps with the                 
          counterparty on an aggregate (i.e., netted) basis.  This was the            
          recommendation of the G-30 report.  During the relevant years,              
          FNBC was capable of measuring credit exposure on an aggregate               
          (netted) basis by way of the program designed for it by Hsieh in            
          1988.                                                                       
                    5.  Impact of the Failure To Account for Netting                  
               FNBC’s failure to account for netting produced large and               
          systematic biases.  FNBC’s failure to take netting into account             
          produced substantial large exposures that were larger than the              
          actual risks under the individual agreements.                               
          52(...continued)                                                            
          proceedings.                                                                
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