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The fair value of retained subordinated securities from securitization transactions is determined usingindependent third-party broker or dealer price quotes, and these securities are classified as Level 2. Thebroker or dealer price quotes are evaluated for reasonableness based upon the performance of the underlyingloans and comparable transaction pricing in the securitization market. The fair value of residual interestscurrently is determined using unobservable inputs and classified as Level 3. The residual interests consist ofinterest-only strips receivable and cash on deposit, and are backed by prime, non-prime and sub-primeautomobile loans issued from March 1999 to April 2008. The fair value is estimated using discounted cashflow analyses. Key inputs to the analysis include the excess cash flow discount rate, the cumulative life lossrate, expected weighted-average life and prepayment speed assumption. We develop our key inputs usingour actual portfolio experience and recent market activity for similar transactions. At least one of thesignificant inputs used in the fair valuation is not observable because recent economic events havesignificantly reduced the number of comparable securitization transactions. During fiscal year 2009, werecognized $46.0 million of write-downs to the residual interests primarily due to an increase in thecumulative life loss rate, partially offset by a decrease in the excess cash flow discount rate. We increasedthe cumulative life loss rate assumption from a range of 2.1% to 5.7% at September 30, 2008 to a range of2.4% to 11.4% at September 30, 2009 to reflect increases in experienced and expected losses. This resultedin an increase in the weighted-average assumption for the cumulative life loss rate from 4.2% atSeptember 30, 2008 to 7.4% at September 30, 2009. The excess cash flow discount rate decreased from19.8% at September 30, 2008 to 14.4% at September 30, 2009 as a result of the changing liquidity premiumin the securitization market. The key assumptions and the sensitivity of the fair value of the residualinterests to an immediate adverse change in those assumptions are shown in Note 9 – Securitization ofLoans Held for Sale in the notes to consolidated financial statements in Item 8 of Part II of this Form 10-K.Investment Securities, Available-for-Sale consist primarily of non-consolidated sponsored investmentproducts and debt securities including U.S. government-sponsored enterprise obligations, securities of U.S.states and political subdivisions, securities of the U.S. Treasury and federal agencies, and corporate debtsecurities. Realized gains and losses are included in investment income using either the average cost method orspecific identification method. Unrealized gains and losses are recorded net of tax as part of accumulated othercomprehensive income until realized. The fair value of non-consolidated sponsored investment products isdetermined based on the published net asset values of the sponsored investment products, and they areclassified as Level 1. The fair value of the debt securities is determined using quoted market prices orindependent third-party broker or dealer price quotes, which are evaluated for reasonableness, and they aregenerally classified as Level 2, except for certain U.S. Treasury securities which are classified as Level 1.Loans Held for Sale consist of retail installment loan sale contracts held for sale in securitizationtransactions. The contracts are secured by new and used automobiles purchased from motor vehicle dealers.The fair value of loans held for sale generally is estimated based on the whole loan market price that wouldbe received if the loans were sold in their current condition, which may include adjustments based on thecomposition of the loan portfolio and liquidity factors. As a result of recent economic conditions,observable whole loan prices for comparable portfolios of automobile loans sold have not been readilyavailable. Therefore, the fair value currently is determined by using discounted cash flow analyses withestimated discount rates for loans with similar terms and collateral. Accordingly, loans held for salecurrently are classified as Level 3.While we believe the valuation methodologies described above are appropriate, the use of differentmethodologies or assumptions to determine the fair value could result in a different estimate of fair value atthe reporting date.Investments are evaluated for other-than-temporary impairment on a quarterly basis when the cost ofan investment exceeds its fair value. For available-for-sale equity securities, we consider many factors,including the severity and duration of the decline in the fair value below cost, our intent and ability to hold54