Bank One Corporation - Page 146

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               Petitioner also contended that the carve-outs were used for            
          pricing.  The facts, however, show that pricing of swaps was                
          market-driven; i.e., FNBC’s traders quoted swap spreads based on            
          where the market was at the time, and where they thought it would           
          go.  Nor were the bonuses for swap personnel ascertained strictly           
          on profitability.  The size of the bonus pool for swap personnel            
          depended on many factors, including how the bank performed as a             
          whole, and did not depend on any adjustment taken by FNBC.  To              
          the extent that swap profitability was a consideration in                   
          determining the bonuses, compensation for traders and marketers             
          was based upon unadjusted mark-to-market revenues raised by each            
          trader or marketer, as well as certain other subjective factors.            
          Nor did FNBC rely upon adjusted midmarket values for buyout                 
          purposes; it required that the buyout prices be (and effected its           
          buyouts) at the midmarket value.                                            
               D.  Credit Adjustment                                                  
                    1.  Need for a Credit Adjustment                                  
               Petitioner argues that FNBC’s calculation of credit                    
          adjustments was necessary to reflect the fair market values of              
          its swaps.75  Respondent acknowledges that the midmarket value of           
          an interest rate swap may have to be adjusted for credit risk in            
          order to arrive at its fair market value when:  (1) The                     


          75 Petitioner concedes that FNBC could determine its current                
          exposure at any point.                                                      




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