x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |
For the quarterly period ended September 30, 2010 | ||
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |
For the transition period from to |
Delaware | 13-4019460 | |
(State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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200 West Street, New York, NY | 10282 | |
(Address of principal executive offices) | (Zip Code) |
Page |
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71 | ||||||||
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93 | ||||||||
155 | ||||||||
155 | ||||||||
156 | ||||||||
156 | ||||||||
157 | ||||||||
158 | ||||||||
EX-12.1 STATEMENT RE: COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND RATIOS | ||||||||
EX-15.1 LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION | ||||||||
EX-31.1 RULE 13A-14(A) CERTIFICATIONS | ||||||||
EX-32.1 SECTION 1350 CERTIFICATIONS | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
Item 1: | Financial Statements (Unaudited) |
Three Months |
Nine Months |
|||||||||||||||
Ended September | Ended September | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
Revenues
|
||||||||||||||||
Investment banking
|
$ | 1,119 | $ | 899 | $ | 3,220 | $ | 3,162 | ||||||||
Trading and principal investments
|
5,605 | 8,801 | 20,092 | 23,829 | ||||||||||||
Asset management and securities services
|
1,051 | 982 | 3,042 | 2,928 | ||||||||||||
Total
non-interest
revenues
|
7,775 | 10,682 | 26,354 | 29,919 | ||||||||||||
Interest income
|
2,937 | 3,000 | 9,240 | 10,832 | ||||||||||||
Interest expense
|
1,809 | 1,310 | 5,075 | 5,193 | ||||||||||||
Net interest income
|
1,128 | 1,690 | 4,165 | 5,639 | ||||||||||||
Net revenues, including net interest income
|
8,903 | 12,372 | 30,519 | 35,558 | ||||||||||||
Operating expenses
|
||||||||||||||||
Compensation and benefits
|
3,828 | 5,351 | 13,123 | 16,712 | ||||||||||||
U.K. bank payroll tax
|
| | 600 | | ||||||||||||
Brokerage, clearing, exchange and distribution fees
|
519 | 580 | 1,703 | 1,690 | ||||||||||||
Market development
|
129 | 84 | 355 | 234 | ||||||||||||
Communications and technology
|
192 | 194 | 554 | 540 | ||||||||||||
Depreciation and amortization
|
355 | 367 | 1,164 | 1,342 | ||||||||||||
Occupancy
|
297 | 230 | 827 | 713 | ||||||||||||
Professional fees
|
256 | 183 | 665 | 463 | ||||||||||||
Other expenses
|
516 | 589 | 2,110 | 1,412 | ||||||||||||
Total
non-compensation
expenses
|
2,264 | 2,227 | 7,378 | 6,394 | ||||||||||||
Total operating expenses
|
6,092 | 7,578 | 21,101 | 23,106 | ||||||||||||
Pre-tax
earnings
|
2,811 | 4,794 | 9,418 | 12,452 | ||||||||||||
Provision for taxes
|
913 | 1,606 | 3,451 | 4,015 | ||||||||||||
Net earnings
|
1,898 | 3,188 | 5,967 | 8,437 | ||||||||||||
Preferred stock dividends
|
161 | 160 | 481 | 1,032 | ||||||||||||
Net earnings applicable to common shareholders
|
$ | 1,737 | $ | 3,028 | $ | 5,486 | $ | 7,405 | ||||||||
Earnings per common share
|
||||||||||||||||
Basic
|
$ | 3.19 | $ | 5.74 | $ | 10.06 | $ | 14.60 | ||||||||
Diluted
|
2.98 | 5.25 | 9.39 | 13.74 | ||||||||||||
Dividends declared per common share
|
$ | 0.35 | $ | 0.35 | $ | 1.05 | $ | 0.70 | ||||||||
Average common shares outstanding
|
||||||||||||||||
Basic
|
541.2 | 525.9 | 542.3 | 505.8 | ||||||||||||
Diluted
|
582.7 | 576.9 | 584.4 | 539.0 |
As of | ||||||||
September |
December |
|||||||
2010 | 2009 | |||||||
(in millions, except share |
||||||||
and per share amounts) | ||||||||
Assets
|
||||||||
Cash and cash equivalents
|
$ | 36,129 | $ | 38,291 | ||||
Cash and securities segregated for regulatory and other purposes
(includes $36,449 and $18,853 at fair value as of
September 2010 and December 2009, respectively)
|
52,192 | 36,663 | ||||||
Collateralized agreements:
|
||||||||
Securities purchased under agreements to resell and federal
funds sold (includes $178,109 and $144,279 at fair value as of
September 2010 and December 2009, respectively)
|
178,109 | 144,279 | ||||||
Securities borrowed (includes $59,881 and $66,329 at fair value
as of September 2010 and December 2009, respectively)
|
184,068 | 189,939 | ||||||
Receivables from brokers, dealers and clearing organizations
|
15,924 | 12,597 | ||||||
Receivables from customers and counterparties (includes $2,072
and $1,925 at fair value as of September 2010 and
December 2009, respectively)
|
61,391 | 55,303 | ||||||
Trading assets, at fair value (includes $42,336 and $31,485
pledged as collateral as of September 2010 and
December 2009, respectively)
|
351,795 | 342,402 | ||||||
Other assets
|
29,071 | 29,468 | ||||||
Total assets
|
$ | 908,679 | $ | 848,942 | ||||
Liabilities and shareholders equity
|
||||||||
Deposits (includes $2,091 and $1,947 at fair value as of
September 2010 and December 2009, respectively)
|
$ | 38,444 | $ | 39,418 | ||||
Collateralized financings:
|
||||||||
Securities sold under agreements to repurchase, at fair value
|
150,429 | 128,360 | ||||||
Securities loaned (includes $1,127 and $6,194 at fair value as
of September 2010 and December 2009, respectively)
|
12,041 | 15,207 | ||||||
Other secured financings (includes $16,449 and $15,228 at fair
value as of September 2010 and December 2009,
respectively)
|
26,593 | 24,134 | ||||||
Payables to brokers, dealers and clearing organizations
|
3,459 | 5,242 | ||||||
Payables to customers and counterparties
|
186,393 | 180,392 | ||||||
Trading liabilities, at fair value
|
155,217 | 129,019 | ||||||
Unsecured
short-term
borrowings, including the current portion of unsecured
long-term
borrowings (includes $22,881 and $18,403 at fair value as of
September 2010 and December 2009, respectively)
|
43,949 | 37,516 | ||||||
Unsecured
long-term
borrowings (includes $18,260 and $21,392 at fair value as of
September 2010 and December 2009, respectively)
|
185,120 | 185,085 | ||||||
Other liabilities and accrued expenses (includes $3,100 and
$2,054 at fair value as of September 2010 and
December 2009, respectively)
|
31,377 | 33,855 | ||||||
Total liabilities
|
833,022 | 778,228 | ||||||
Commitments, contingencies and guarantees
|
||||||||
Shareholders equity
|
||||||||
Preferred stock, par value $0.01 per share; aggregate
liquidation preference of $8,100 as of both September 2010
and December 2009
|
6,957 | 6,957 | ||||||
Common stock, par value $0.01 per share;
4,000,000,000 shares authorized, 768,251,778 and
753,412,247 shares issued as of September 2010 and
December 2009, respectively, and 511,518,083 and
515,113,890 shares outstanding as of September 2010
and December 2009, respectively
|
8 | 8 | ||||||
Restricted stock units and employee stock options
|
7,257 | 6,245 | ||||||
Nonvoting common stock, par value $0.01 per share;
200,000,000 shares authorized, no shares issued and
outstanding
|
| | ||||||
Additional
paid-in
capital
|
41,785 | 39,770 | ||||||
Retained earnings
|
55,136 | 50,252 | ||||||
Accumulated other comprehensive loss
|
(284 | ) | (362 | ) | ||||
Stock held in treasury, at cost, par value $0.01 per share;
256,733,697 and 238,298,357 shares as of
September 2010 and December 2009, respectively
|
(35,202 | ) | (32,156 | ) | ||||
Total shareholders equity
|
75,657 | 70,714 | ||||||
Total liabilities and shareholders equity
|
$ | 908,679 | $ | 848,942 | ||||
Nine Months |
||||||||
Ended | Year Ended | |||||||
September 2010 | December 2009 | |||||||
(in millions) | ||||||||
Preferred stock
|
||||||||
Balance, beginning of year
|
$ | 6,957 | $ | 16,483 | ||||
Accretion
|
| 48 | ||||||
Repurchased
|
| (9,574 | ) | |||||
Balance, end of period
|
6,957 | 6,957 | ||||||
Common stock
|
||||||||
Balance, beginning of year
|
8 | 7 | ||||||
Issued
|
| 1 | ||||||
Balance, end of period
|
8 | 8 | ||||||
Restricted stock units and employee stock options
|
||||||||
Balance, beginning of year
|
6,245 | 9,463 | ||||||
Issuance and amortization of restricted stock units and employee
stock options
|
3,611 | 2,064 | ||||||
Delivery of common stock underlying restricted stock units
|
(2,501 | ) | (5,206 | ) | ||||
Forfeiture of restricted stock units and employee stock options
|
(93 | ) | (73 | ) | ||||
Exercise of employee stock options
|
(5 | ) | (3 | ) | ||||
Balance, end of period
|
7,257 | 6,245 | ||||||
Additional
paid-in
capital
|
||||||||
Balance, beginning of year
|
39,770 | 31,070 | ||||||
Issuance of common stock
|
| 5,750 | ||||||
Repurchase of common stock warrants
|
| (1,100 | ) | |||||
Delivery of common stock underlying restricted stock units and
proceeds from the exercise of employee stock options
|
2,822 | 5,708 | ||||||
Cancellation of restricted stock units in satisfaction of
withholding tax requirements
|
(963 | ) | (863 | ) | ||||
Excess net tax benefit/(provision) related to
share-based
compensation
|
157 | (793 | ) | |||||
Cash settlement of
share-based
compensation
|
(1 | ) | (2 | ) | ||||
Balance, end of period
|
41,785 | 39,770 | ||||||
Retained earnings
|
||||||||
Balance, beginning of year
|
50,252 | 38,579 | ||||||
Net earnings
|
5,967 | 13,385 | ||||||
Dividends and dividend equivalents declared on common stock and
restricted stock units
|
(602 | ) | (588 | ) | ||||
Dividends declared on preferred stock
|
(481 | ) | (1,076 | ) | ||||
Preferred stock accretion
|
| (48 | ) | |||||
Balance, end of period
|
55,136 | 50,252 | ||||||
Accumulated other comprehensive income/(loss)
|
||||||||
Balance, beginning of year
|
(362 | ) | (372 | ) | ||||
Currency translation adjustment, net of tax
|
(37 | ) | (70 | ) | ||||
Pension and postretirement liability adjustments, net of tax
|
17 | (17 | ) | |||||
Net unrealized gains on
available-for-sale
securities, net of tax
|
98 | 97 | ||||||
Balance, end of period
|
(284 | ) | (362 | ) | ||||
Stock held in treasury, at cost
|
||||||||
Balance, beginning of year
|
(32,156 | ) | (32,176 | ) | ||||
Repurchased
|
(3,089 | ) | (2 | ) (1) | ||||
Reissued
|
43 | 22 | ||||||
Balance, end of period
|
(35,202 | ) | (32,156 | ) | ||||
Total shareholders equity
|
$ | 75,657 | $ | 70,714 | ||||
(1) | Relates primarily to repurchases of common stock by a broker-dealer subsidiary to facilitate customer transactions in the ordinary course of business and shares withheld to satisfy withholding tax requirements. |
Nine Months |
||||||||
Ended September | ||||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Cash flows from operating activities
|
||||||||
Net earnings
|
$ | 5,967 | $ | 8,437 | ||||
Non-cash
items included in net earnings
|
||||||||
Depreciation and amortization
|
1,173 | 1,549 | ||||||
Share-based
compensation
|
3,539 | 1,345 | ||||||
Changes in operating assets and liabilities
|
||||||||
Cash and securities segregated for regulatory and other purposes
|
(15,553 | ) | 69,748 | |||||
Net receivables from brokers, dealers and clearing organizations
|
(5,061 | ) | 4,001 | |||||
Net payables to customers and counterparties
|
(2 | ) | (45,872 | ) | ||||
Securities borrowed, net of securities loaned
|
2,704 | (22,485 | ) | |||||
Securities sold under agreements to repurchase, net of
securities purchased under agreements to resell and federal
funds sold
|
(11,760 | ) | (146,443 | ) | ||||
Trading assets, at fair value
|
3,516 | 177,292 | ||||||
Trading liabilities, at fair value
|
26,102 | (35,646 | ) | |||||
Other, net
|
(7,500 | ) | 11,426 | |||||
Net cash provided by operating activities
|
3,125 | 23,352 | ||||||
Cash flows from investing activities
|
||||||||
Purchase of property, leasehold improvements and equipment
|
(899 | ) | (1,077 | ) | ||||
Proceeds from sales of property, leasehold improvements and
equipment
|
63 | 52 | ||||||
Business acquisitions, net of cash acquired
|
(779 | ) | (210 | ) | ||||
Proceeds from sales of investments
|
717 | 201 | ||||||
Purchase of
available-for-sale
securities
|
(1,748 | ) | (2,405 | ) | ||||
Proceeds from sales of
available-for-sale
securities
|
1,869 | 2,139 | ||||||
Net cash used for investing activities
|
(777 | ) | (1,300 | ) | ||||
Cash flows from financing activities
|
||||||||
Unsecured
short-term
borrowings, net
|
213 | (12,052 | ) | |||||
Other secured financings
(short-term),
net
|
2,744 | (8,820 | ) | |||||
Proceeds from issuance of other secured financings
(long-term)
|
2,505 | 3,703 | ||||||
Repayment of other secured financings
(long-term),
including the current portion
|
(3,503 | ) | (3,652 | ) | ||||
Proceeds from issuance of unsecured
long-term
borrowings
|
15,652 | 23,989 | ||||||
Repayment of unsecured
long-term
borrowings, including the current portion
|
(18,494 | ) | (22,087 | ) | ||||
Preferred stock repurchased
|
| (9,574 | ) | |||||
Repurchase of common stock warrants
|
| (1,100 | ) | |||||
Derivative contracts with a financing element, net
|
865 | 2,130 | ||||||
Deposits, net
|
(974 | ) | 10,301 | |||||
Common stock repurchased
|
(3,088 | ) | (2 | ) | ||||
Dividends and dividend equivalents paid on common stock,
preferred stock and restricted stock units
|
(1,083 | ) | (1,850 | ) | ||||
Proceeds from issuance of common stock, including stock option
exercises
|
357 | 6,089 | ||||||
Excess tax benefit related to
share-based
compensation
|
297 | 85 | ||||||
Cash settlement of
share-based
compensation
|
(1 | ) | (2 | ) | ||||
Net cash used for financing activities
|
(4,510 | ) | (12,842 | ) | ||||
Net increase/(decrease) in cash and cash equivalents
|
(2,162 | ) | 9,210 | |||||
Cash and cash equivalents, beginning of year
|
38,291 | 13,805 | ||||||
Cash and cash equivalents, end of period
|
$ | 36,129 | $ | 23,015 | ||||
Three Months |
Nine Months |
|||||||||||||||
Ended September | Ended September | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Net earnings
|
$ | 1,898 | $ | 3,188 | $ | 5,967 | $ | 8,437 | ||||||||
Currency translation adjustment, net of tax
|
(23 | ) | (1 | ) | (37 | ) | (30 | ) | ||||||||
Pension and postretirement liability adjustments, net of tax
|
6 | 8 | 17 | 25 | ||||||||||||
Net unrealized gains on
available-for-sale
securities, net of tax
|
51 | 103 | 98 | 137 | ||||||||||||
Comprehensive income
|
$ | 1,932 | $ | 3,298 | $ | 6,045 | $ | 8,569 | ||||||||
Note 1. | Description of Business |
| Investment Banking. The firm provides a broad range of investment banking services to a diverse group of corporations, financial institutions, investment funds, governments and individuals. | |
| Trading and Principal Investments. The firm facilitates client transactions with a diverse group of corporations, financial institutions, investment funds, governments and individuals through market making in, trading of and investing in fixed income and equity products, currencies, commodities and derivatives on these products. The firm also takes proprietary positions on certain of these products. In addition, the firm engages in market-making activities on equities and options exchanges, and the firm clears client transactions on major stock, options and futures exchanges worldwide. In connection with the firms merchant banking and other investing activities, the firm makes principal investments directly and through funds that the firm raises and manages. | |
| Asset Management and Securities Services. The firm provides investment and wealth advisory services and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and provides prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and to high-net-worth individuals worldwide. |
Note 2. | Significant Accounting Policies |
| Voting Interest Entities. Voting interest entities are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. Accordingly, the firm consolidates voting interest entities in which it has a majority voting interest. |
| Variable Interest Entities. VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has a variable interest, or a combination of variable interests, that provides the enterprise with (i) the power to direct the activities of the VIE that most significantly impact the VIEs economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. The firm determines whether it is the primary beneficiary of a VIE by performing an analysis that principally considers: (i) the VIEs purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders, (ii) the VIEs capital structure, (iii) the terms between the VIE and its variable interest holders and other parties involved with the VIE, (iv) which variable interest holders have the power to direct the activities of the VIE that most significantly impact the VIEs economic performance, (v) which variable interest holders have the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE and (vi) related party relationships. The firm reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. The firm reassesses its determination of whether the firm is the primary beneficiary of a VIE upon changes in facts and circumstances that could potentially alter the firms assessment. See Recent Accounting Developments below for further information regarding accounting for VIEs. |
| Equity-Method Investments. When the firm does not have a controlling financial interest in an entity but exerts significant influence over the entitys operating and financial policies (generally defined as owning a voting interest of 20% to 50%) and has an investment in common stock or in-substance common stock, the firm accounts for its investment either under the equity method of accounting or at fair value pursuant to the fair value option available under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 825-10. In general, the firm accounts for investments acquired subsequent to November 24, 2006, when the fair value option became available, at fair value. In certain cases, the firm applies the equity method of accounting to new investments that are strategic in nature or closely related to the firms principal business activities, where the firm has a significant degree of involvement in the cash flows or operations of the investee, or where cost-benefit considerations are less significant. See Revenue Recognition Other Financial Assets and Financial Liabilities at Fair Value below for a discussion of the firms application of the fair value option. | |
| Other. If the firm does not consolidate an entity or apply the equity method of accounting, the firm accounts for its investment at fair value. The firm also has formed numerous nonconsolidated investment funds with third-party investors that are typically organized as limited partnerships. The firm acts as general partner for these funds and generally does not hold a majority of the economic interests in these funds. The firm has generally provided the third-party investors with rights to terminate the funds or to remove the firm as the general partner. As a result, the firm does not consolidate these funds. Investments in these funds are included in Trading assets, at fair value in the condensed consolidated statements of financial condition. |
| certain unsecured short-term borrowings, consisting of all promissory notes and commercial paper and certain hybrid financial instruments; | |
| certain other secured financings, primarily transfers of financial assets accounted for as financings rather than sales, debt raised through the firms William Street credit extension program and certain other nonrecourse financings; | |
| certain unsecured long-term borrowings, including prepaid physical commodity transactions and certain hybrid financial instruments; | |
| resale and repurchase agreements; | |
| securities borrowed and loaned within Trading and Principal Investments, consisting of the firms matched book and certain firm financing activities; | |
| certain deposits issued by the firms bank subsidiaries, as well as securities held by Goldman Sachs Bank USA (GS Bank USA); | |
| certain receivables from customers and counterparties, including certain margin loans, transfers of financial assets accounted for as secured loans rather than purchases and prepaid variable share forwards; | |
| certain insurance and reinsurance contracts and certain guarantees; | |
| certain subordinated liabilities issued by consolidated VIEs; and | |
| in general, investments acquired after November 24, 2006, when the fair value option became available, where the firm has significant influence over the investee and would otherwise apply the equity method of accounting. |
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | |
Level 2 | Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly; | |
Level 3 | Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. |
| Cash instruments. The firms cash instruments are generally classified within level 1 or level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted prices in active markets include U.S. and non-U.S. government obligations, actively traded listed equities and certain money market instruments. These instruments are generally classified within level 1 of the fair value hierarchy. Instruments classified within level 1 of the fair value hierarchy are required to be carried at quoted market prices, even in situations where the firm holds a large position and a sale could reasonably impact the quoted price. | |
The types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency include commercial paper, certificates of deposit, time deposits, most government agency obligations, most corporate debt securities, certain mortgage-backed loans and securities, certain bank loans and bridge loans, less liquid publicly listed equities, certain state and municipal obligations and certain money market instruments and loan commitments. These instruments are generally classified within level 2 of the fair value hierarchy. For positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability. Such adjustments are generally based on market evidence where available. |
| Derivative contracts. Derivative contracts are instruments such as futures, forwards, swaps or option contracts that derive their value from underlying asset prices, indices, reference rates and other inputs or a combination of these factors. Derivative instruments may be privately negotiated contracts, which are often referred to as over-the-counter (OTC) derivatives, or they may be listed and traded on an exchange. The assets and inputs underlying derivative instruments may include financial instruments (such as government and corporate bonds, mortgage and other asset-backed loans and securities and bank loans), currencies, commodities, interest rates and related indices. | |
Exchange-traded derivatives typically fall within level 1 or level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not. The firm generally values exchange-traded derivatives using models which calibrate to market-clearing levels and eliminate timing differences between the closing price of the exchange-traded derivatives and their underlying instruments. In such cases, exchange-traded derivatives are classified within level 2 of the fair value hierarchy. | ||
OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources with reasonable levels of price transparency. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. The firm generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC derivatives are classified within level 2 of the fair value hierarchy when all of the significant inputs are corroborated by market evidence. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on market evidence where available. |
| Equities and convertible debentures. For private equity investments, recent third-party investments or pending transactions are considered to be the best evidence for any change in fair value. In the absence of such evidence, valuations are based on one or more of the following methodologies, as appropriate and available: transactions in similar instruments, discounted cash flow techniques, third-party independent appraisals, valuation multiples and public comparables. Such evidence includes pending reorganizations (e.g., merger proposals, |
tender offers or debt restructurings), and significant changes in financial metrics (e.g., operating results as compared to previous projections, industry multiples, credit ratings and balance sheet ratios). Real estate fund investments are carried at net asset value per share. The underlying investments in the funds are generally valued using discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, capitalization rates and valuation multiples. |
| Bank loans and bridge loans, Corporate debt securities, State and municipal obligations and Other debt obligations. Valuations are generally based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions. The significant inputs are generally determined based on relative value analyses, which incorporate comparisons both to credit default swaps that reference the same underlying credit risk and to other debt instruments for the same issuer for which observable prices or broker quotes are available. | |
| Loans and securities backed by commercial real estate. Loans and securities backed by commercial real estate are collateralized by specific assets and may be tranched into varying levels of subordination. Due to the nature of these instruments, valuation techniques vary by instrument, but are generally based on relative value analyses, discounted cash flow techniques or a combination thereof. Significant inputs for these valuations include transactions in both the underlying collateral and instruments with the same or substantially the same underlying collateral, credit default swap prices, current levels and trends of market indices (such as the CMBX), market yields and other factors (such as the operating income generated by the underlying collateral) which are used in determining the amount and timing of expected future cash flows. | |
| Loans and securities backed by residential real estate. Valuations are based on both proprietary and industry recognized models (including Intex and Bloomberg), and discounted cash flow techniques. The most significant inputs to the valuation of these instruments are the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices. The significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices such as the ABX. | |
| Loan portfolios. Loan portfolios are acquired portfolios of distressed loans, primarily backed by commercial and residential real estate collateral. Valuations are based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows and market yields. The significant inputs are determined based on relative value analyses which incorporate comparisons to recent auction data for other similar loan portfolios. | |
| Derivative contracts. Certain OTC derivatives trade in less liquid markets with limited pricing information and the determination of fair value for these derivatives is inherently more difficult. The valuations of these less liquid OTC derivatives are typically based on level 1 and/or level 2 inputs that can be observed in the market, as well as unobservable level 3 inputs. Unobservable inputs typically include certain correlations as well as credit spreads, equity volatilities, commodity prices and commodity volatilities that are long-dated or derived from trading activity in inactive or less liquid markets. When unobservable inputs to a valuation model are significant to the fair value measurement of an instrument, the instrument is classified within level 3 of the fair value hierarchy. Subsequent to initial recognition, the firm updates the level 1 and level 2 inputs to reflect observable market changes with resulting gains |
and losses reflected within level 3. Level 3 inputs are only changed when corroborated by evidence such as similar market transactions, third-party pricing services and/or broker or dealer quotations, or other empirical market data. In circumstances where the firm cannot verify the model value to market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. |
| Resale and Repurchase Agreements and Securities Borrowed and Loaned. The significant inputs to the valuation of resale and repurchase agreements and securities borrowed and loaned within Trading and Principal Investments (which are related to the firms matched book and certain firm financing activities) are generally the amount and timing of expected future cash flows, interest rates and collateral funding spreads. | |
| Other Secured Financings. The significant inputs to the valuation of other secured financings at fair value, including transfers of financial assets accounted for as financings rather than sales, debt raised through the firms William Street credit extension program and certain other nonrecourse financings, are the amount and timing of expected future cash flows, interest rates, the fair value of the collateral delivered by the firm (which is determined using the amount and timing of expected future cash flows, market yields and recovery assumptions), the frequency of additional collateral calls and the credit spreads of the firm. | |
| Unsecured short-term and long-term borrowings. The significant inputs to the valuation of certain short-term and long-term borrowings at fair value, including all promissory notes and commercial paper, certain hybrid financial instruments and prepaid physical commodity transactions, are the amount and timing of expected future cash flows, interest rates, the credit spreads of the firm, as well as commodity prices in the case of prepaid physical commodity transactions and, for certain hybrid financial instruments, equity prices, inflation rates and index levels. | |
| Receivables from customers and counterparties. The significant inputs to the valuation of certain receivables from customers and counterparties, including certain margin loans, transfers of financial assets accounted for as secured loans rather than purchases and prepaid variable share forwards, are interest rates and the amount and timing of expected future cash flows. | |
| Insurance and reinsurance contracts. Insurance and reinsurance contracts at fair value are included in Receivables from customers and counterparties and Other liabilities and accrued expenses in the firms condensed consolidated statements of financial condition. These contracts are valued using market transactions and other market evidence where possible, including market-based inputs to models, calibration to market-clearing transactions or other alternative pricing sources with reasonable levels of price transparency. Significant level 2 inputs typically include interest rates and inflation risk. Significant level 3 inputs typically include mortality or funding benefit assumptions. When unobservable inputs to a valuation model are significant to the fair value measurement of an instrument, the instrument is classified within level 3 of the fair value hierarchy. | |
| Deposits. The significant inputs to the valuation of deposits are interest rates. |
| Resale and Repurchase Agreements. Securities purchased under agreements to resell and securities sold under agreements to repurchase, principally U.S. government, federal agency and investment-grade sovereign obligations, represent collateralized financing transactions. The firm receives securities purchased under agreements to resell, makes delivery of securities sold under agreements to repurchase, monitors the market value of these securities on a daily basis and delivers or obtains additional collateral as appropriate. As noted above, resale and repurchase agreements are carried in the condensed consolidated statements of financial condition at fair value under the fair value option. | |
| Securities Borrowed and Loaned. Securities borrowed and loaned are generally collateralized by cash, securities or letters of credit. The firm receives securities borrowed, makes delivery of securities loaned, monitors the market value of securities borrowed and loaned, and delivers or obtains additional collateral as appropriate. Securities borrowed and loaned within Securities Services, relating to both customer activities and, to a lesser extent, certain firm financing activities, are recorded based on the amount of cash collateral advanced or received plus accrued interest. As these arrangements generally can be terminated on demand, they exhibit little, if any, sensitivity to changes in interest rates. As noted above, securities borrowed and loaned within Trading and Principal Investments, which are related to the firms matched book and certain firm financing activities, are recorded at fair value under the fair value option. | |
| Other Secured Financings. In addition to repurchase agreements and securities loaned, the firm funds assets through the use of other secured financing arrangements and pledges financial instruments and other assets as collateral in these transactions. As noted above, the firm has elected to apply the fair value option to transfers of financial assets accounted for as financings rather than sales, debt raised through the firms William Street credit extension program and certain other nonrecourse financings, for which the use of fair value eliminates non-economic volatility in earnings that would arise from using different measurement attributes. Other secured financings that are not recorded at fair value are recorded based on the amount of cash received plus accrued interest. See Note 3 for further information regarding other secured financings. |
Note 3. | Financial Instruments |
As of | ||||||||||||||||
September 2010 | December 2009 | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
(in millions) | ||||||||||||||||
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
$ | 10,537 | (1) | $ | | $ | 9,111 | (1) | $ | | ||||||
U.S. government and federal agency obligations
|
84,882 | 20,948 | 78,336 | 20,982 | ||||||||||||
Non-U.S. government
obligations
|
46,980 | 33,073 | 38,858 | 23,843 | ||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||
Loans and securities backed by commercial real estate
|
5,963 | 1 | 6,203 | 29 | ||||||||||||
Loans and securities backed by residential real estate
|
6,900 | 4 | 6,704 | 74 | ||||||||||||
Loan portfolios
|
1,488 | (2) | | 1,370 | (2) | | ||||||||||
Bank loans and bridge loans
|
17,789 | 1,470 | (5) | 19,345 | 1,541 | (5) | ||||||||||
Corporate debt securities
|
25,497 | 7,872 | 26,368 | 6,229 | ||||||||||||
State and municipal obligations
|
2,471 | | 2,759 | 36 | ||||||||||||
Other debt obligations
|
2,888 | | 2,914 | | ||||||||||||
Equities and convertible debentures
|
60,544 | 28,020 | 71,474 | 20,253 | ||||||||||||
Physical commodities
|
4,382 | 62 | 3,707 | 23 | ||||||||||||
Derivative contracts
|
81,474 | (3) | 63,767 | (6) | 75,253 | (3) | 56,009 | (6) | ||||||||
Total
|
$ | 351,795 | (4) | $ | 155,217 | $ | 342,402 | (4) | $ | 129,019 | ||||||
(1) | Includes $4.09 billion and $4.31 billion as of September 2010 and December 2009, respectively, of money market instruments held by William Street Funding Corporation (Funding Corp.) to support the William Street credit extension program. See Note 8 for further information regarding the William Street credit extension program. | |
(2) | Consists of acquired portfolios of distressed loans, primarily backed by commercial and residential real estate collateral. | |
(3) | Net of cash collateral received pursuant to credit support agreements of $121.09 billion and $124.60 billion as of September 2010 and December 2009, respectively. | |
(4) | Includes $4.00 billion and $3.86 billion as of September 2010 and December 2009, respectively, of securities accounted for as available-for-sale, substantially all of which is held within the firms insurance subsidiaries. | |
(5) | Includes the fair value of unfunded commitments to extend credit. The fair value of partially funded commitments is included in trading assets, at fair value. | |
(6) | Net of cash collateral posted pursuant to credit support agreements of $18.88 billion and $14.74 billion as of September 2010 and December 2009, respectively. |
As of | ||||||||||||
September |
June |
December |
||||||||||
2010 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Total level 3 assets
|
$ | 46,491 | $ | 46,125 | $ | 46,475 | ||||||
Level 3 assets for which the firm bears economic
exposure (1)
|
43,826 | 43,516 | 43,348 | |||||||||
Total assets
|
908,679 | 883,188 | 848,942 | |||||||||
Total financial assets at fair value
|
628,306 | 614,270 | 573,788 | |||||||||
Total level 3 assets as a percentage of Total assets
|
5.1 | % | 5.2 | % | 5.5 | % | ||||||
Level 3 assets for which the firm bears economic exposure
as a percentage of Total assets
|
4.8 | 4.9 | 5.1 | |||||||||
Total level 3 assets as a percentage of Total financial
assets at fair value
|
7.4 | 7.5 | 8.1 | |||||||||
Level 3 assets for which the firm bears economic exposure
as a percentage of Total financial assets at fair value
|
7.0 | 7.1 | 7.6 |
(1) | Excludes assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. |
Financial Assets at Fair Value as of September 2010 | ||||||||||||||||||||
Netting and |
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
$ | 4,311 | $ | 6,226 | $ | | $ | | $ | 10,537 | ||||||||||
U.S. government and federal agency obligations
|
40,927 | 43,955 | | | 84,882 | |||||||||||||||
Non-U.S. government
obligations
|
42,873 | 4,107 | | | 46,980 | |||||||||||||||
Mortgage and other
asset-backed
loans and
securities (1):
|
||||||||||||||||||||
Loans and securities backed by commercial real estate
|
| 1,973 | 3,990 | | 5,963 | |||||||||||||||
Loans and securities backed by residential real estate
|
| 4,651 | 2,249 | | 6,900 | |||||||||||||||
Loan portfolios
|
| 222 | 1,266 | | 1,488 | |||||||||||||||
Bank loans and bridge loans
|
| 8,256 | 9,533 | | 17,789 | |||||||||||||||
Corporate debt
securities (2)
|
142 | 23,004 | 2,351 | | 25,497 | |||||||||||||||
State and municipal obligations
|
| 1,613 | 858 | | 2,471 | |||||||||||||||
Other debt obligations
|
| 1,484 | 1,404 | | 2,888 | |||||||||||||||
Equities and convertible debentures
|
34,449 | (4) | 14,477 | (6) | 11,618 | (8) | | 60,544 | ||||||||||||
Physical commodities
|
| 4,382 | | | 4,382 | |||||||||||||||
Total cash instruments
|
122,702 | 114,350 | 33,269 | | 270,321 | |||||||||||||||
Derivative contracts
|
141 | 191,907 | 12,752 | (123,326 | ) (9) | 81,474 | ||||||||||||||
Trading assets, at fair value
|
122,843 | 306,257 | 46,021 | (123,326 | ) | 351,795 | ||||||||||||||
Securities segregated for regulatory and other purposes
|
22,815 | (5) | 13,634 | (7) | | | 36,449 | |||||||||||||
Securities purchased under agreements to resell
|
| 177,923 | 186 | | 178,109 | |||||||||||||||
Securities borrowed
|
| 59,881 | | | 59,881 | |||||||||||||||
Receivables from customers and counterparties
|
| 1,788 | 284 | | 2,072 | |||||||||||||||
Total financial assets at fair value
|
$ | 145,658 | $ | 559,483 | $ | 46,491 | $ | (123,326 | ) | $ | 628,306 | |||||||||
Level 3 assets for which the firm does not bear economic
exposure (3)
|
(2,665 | ) | ||||||||||||||||||
Level 3 assets for which the firm bears economic exposure
|
$ | 43,826 | ||||||||||||||||||
(1) | Includes $146 million and $566 million of collateralized debt obligations (CDOs) backed by real estate within level 2 and level 3, respectively, of the fair value hierarchy. |
(2) | Includes $430 million and $814 million of CDOs and collateralized loan obligations (CLOs) backed by corporate obligations within level 2 and level 3, respectively, of the fair value hierarchy. |
(3) | Consists of level 3 assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. |
(4) | Consists of publicly listed equity securities. Includes the firms $7.55 billion investment in the ordinary shares of Industrial and Commercial Bank of China Limited, which was transferred from level 2 within the fair value hierarchy upon expiration of transfer restrictions in April 2010. |
(5) | Principally consists of U.S. Department of the Treasury (U.S. Treasury) securities and money market instruments as well as insurance separate account assets measured at fair value. |
(6) | Principally consists of less liquid publicly listed securities. |
(7) | Principally consists of securities borrowed and resale agreements. The underlying securities have been segregated to satisfy certain regulatory requirements. |
(8) | Includes $10.50 billion of private equity investments, $950 million of real estate investments and $165 million of convertible debentures. |
(9) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
Financial Liabilities at Fair Value as of September 2010 | ||||||||||||||||||||
Netting and |
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
U.S. government and federal agency obligations
|
$ | 20,792 | $ | 156 | $ | | $ | | $ | 20,948 | ||||||||||
Non-U.S. government
obligations
|
32,555 | 518 | | | 33,073 | |||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||
Loans and securities backed by commercial real estate
|
| 1 | | | 1 | |||||||||||||||
Loans and securities backed by residential real estate
|
| 2 | 2 | | 4 | |||||||||||||||
Bank loans and bridge loans
|
| 1,057 | 413 | | 1,470 | |||||||||||||||
Corporate debt
securities (1)
|
42 | 7,755 | 75 | | 7,872 | |||||||||||||||
Equities and convertible
debentures (2)
|
26,931 | 1,084 | 5 | | 28,020 | |||||||||||||||
Physical commodities
|
| 62 | | | 62 | |||||||||||||||
Total cash instruments
|
80,320 | 10,635 | 495 | | 91,450 | |||||||||||||||
Derivative contracts
|
116 | 78,328 | 6,439 | (21,116 | ) (4) | 63,767 | ||||||||||||||
Trading liabilities, at fair value
|
80,436 | 88,963 | 6,934 | (21,116 | ) | 155,217 | ||||||||||||||
Deposits
|
| 2,091 | | | 2,091 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value
|
| 148,358 | 2,071 | | 150,429 | |||||||||||||||
Securities loaned
|
| 1,127 | | | 1,127 | |||||||||||||||
Other secured financings
|
| 8,468 | 7,981 | | 16,449 | |||||||||||||||
Unsecured
short-term
borrowings
|
| 19,990 | 2,891 | | 22,881 | |||||||||||||||
Unsecured
long-term
borrowings
|
| 16,357 | 1,903 | | 18,260 | |||||||||||||||
Other liabilities and accrued expenses
|
| 624 | 2,476 | | 3,100 | |||||||||||||||
Total financial liabilities at fair value
|
$ | 80,436 | $ | 285,978 | $ | 24,256 | (3) | $ | (21,116 | ) | $ | 369,554 | ||||||||
(1) | Includes $65 million of CDOs and CLOs backed by corporate obligations, all of which are within level 3 of the fair value hierarchy. |
(2) | Substantially all consists of publicly listed equity securities. |
(3) | Level 3 liabilities were 6.6% of Total financial liabilities at fair value. |
(4) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
Financial Assets at Fair Value as of December 2009 | ||||||||||||||||||||
Netting and |
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
$ | 5,026 | $ | 4,085 | $ | | $ | | $ | 9,111 | ||||||||||
U.S. government and federal agency obligations
|
36,391 | 41,945 | | | 78,336 | |||||||||||||||
Non-U.S. government
obligations
|
33,881 | 4,977 | | | 38,858 | |||||||||||||||
Mortgage and other
asset-backed
loans and
securities (1):
|
||||||||||||||||||||
Loans and securities backed by commercial real estate
|
| 1,583 | 4,620 | | 6,203 | |||||||||||||||
Loans and securities backed by residential real estate
|
| 4,824 | 1,880 | | 6,704 | |||||||||||||||
Loan portfolios
|
| 6 | 1,364 | | 1,370 | |||||||||||||||
Bank loans and bridge loans
|
| 9,785 | 9,560 | | 19,345 | |||||||||||||||
Corporate debt
securities (2)
|
164 | 23,969 | 2,235 | | 26,368 | |||||||||||||||
State and municipal obligations
|
| 1,645 | 1,114 | | 2,759 | |||||||||||||||
Other debt obligations
|
| 679 | 2,235 | | 2,914 | |||||||||||||||
Equities and convertible debentures
|
37,103 | (4) | 22,500 | (6) | 11,871 | (9) | | 71,474 | ||||||||||||
Physical commodities
|
| 3,707 | | | 3,707 | |||||||||||||||
Total cash instruments
|
112,565 | 119,705 | 34,879 | | 267,149 | |||||||||||||||
Derivative contracts
|
161 | 190,816 | (7) | 11,596 | (7) | (127,320 | ) (10) | 75,253 | ||||||||||||
Trading assets, at fair value
|
112,726 | 310,521 | 46,475 | (127,320 | ) | 342,402 | ||||||||||||||
Securities segregated for regulatory and other purposes
|
14,381 | (5) | 4,472 | (8) | | | 18,853 | |||||||||||||
Securities purchased under agreements to resell
|
| 144,279 | | | 144,279 | |||||||||||||||
Securities borrowed
|
| 66,329 | | | 66,329 | |||||||||||||||
Receivables from customers and counterparties
|
| 1,925 | | | 1,925 | |||||||||||||||
Total financial assets at fair value
|
$ | 127,107 | $ | 527,526 | $ | 46,475 | $ | (127,320 | ) | $ | 573,788 | |||||||||
Level 3 assets for which the firm does not bear economic
exposure (3)
|
(3,127 | ) | ||||||||||||||||||
Level 3 assets for which the firm bears economic exposure
|
$ | 43,348 | ||||||||||||||||||
(1) | Includes $291 million and $311 million of CDOs and CLOs backed by real estate within level 2 and level 3, respectively, of the fair value hierarchy. | |
(2) | Includes $338 million and $741 million of CDOs and CLOs backed by corporate obligations within level 2 and level 3, respectively, of the fair value hierarchy. | |
(3) | Consists of level 3 assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. | |
(4) | Consists of publicly listed equity securities. | |
(5) | Principally consists of U.S. Treasury securities and money market instruments as well as insurance separate account assets measured at fair value. | |
(6) | Substantially all consists of less liquid publicly listed securities. | |
(7) | Includes $31.44 billion and $9.58 billion of credit derivative assets within level 2 and level 3, respectively, of the fair value hierarchy. These amounts exclude the effects of netting under enforceable netting agreements across other derivative product types. | |
(8) | Principally consists of securities borrowed and resale agreements. The underlying securities have been segregated to satisfy certain regulatory requirements. | |
(9) | Includes $10.56 billion of private equity investments, $1.23 billion of real estate investments and $79 million of convertible debentures. |
(10) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
Financial Liabilities at Fair Value as of December 2009 | ||||||||||||||||||||
Netting and |
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
U.S. government and federal agency obligations
|
$ | 20,940 | $ | 42 | $ | | $ | | $ | 20,982 | ||||||||||
Non-U.S. government
obligations
|
23,306 | 537 | | | 23,843 | |||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||
Loans and securities backed by commercial real estate
|
| 29 | | | 29 | |||||||||||||||
Loans and securities backed by residential real estate
|
| 74 | | | 74 | |||||||||||||||
Bank loans and bridge loans
|
| 1,128 | 413 | | 1,541 | |||||||||||||||
Corporate debt
securities (1)
|
65 | 6,018 | 146 | | 6,229 | |||||||||||||||
State and municipal obligations
|
| 36 | | | 36 | |||||||||||||||
Equities and convertible
debentures (2)
|
19,072 | 1,168 | 13 | | 20,253 | |||||||||||||||
Physical commodities
|
| 23 | | | 23 | |||||||||||||||
Total cash instruments
|
63,383 | 9,055 | 572 | | 73,010 | |||||||||||||||
Derivative contracts
|
126 | 66,943 | (3) | 6,400 | (3) | (17,460 | ) (5) | 56,009 | ||||||||||||
Trading liabilities, at fair value
|
63,509 | 75,998 | 6,972 | (17,460 | ) | 129,019 | ||||||||||||||
Deposits
|
| 1,947 | | | 1,947 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value
|
| 127,966 | 394 | | 128,360 | |||||||||||||||
Securities loaned
|
| 6,194 | | | 6,194 | |||||||||||||||
Other secured financings
|
118 | 8,354 | 6,756 | | 15,228 | |||||||||||||||
Unsecured
short-term
borrowings
|
| 16,093 | 2,310 | | 18,403 | |||||||||||||||
Unsecured
long-term
borrowings
|
| 18,315 | 3,077 | | 21,392 | |||||||||||||||
Other liabilities and accrued expenses
|
| 141 | 1,913 | | 2,054 | |||||||||||||||
Total financial liabilities at fair value
|
$ | 63,627 | $ | 255,008 | $ | 21,422 | (4) | $ | (17,460 | ) | $ | 322,597 | ||||||||
(1) | Includes $45 million of CDOs and CLOs backed by corporate obligations, all of which are within level 3 of the fair value hierarchy. |
(2) | Substantially all consists of publicly listed equity securities. |
(3) | Includes $7.96 billion and $3.20 billion of credit derivative liabilities within level 2 and level 3, respectively, of the fair value hierarchy. These amounts exclude the effects of netting under enforceable netting agreements across other derivative product types. |
(4) | Level 3 liabilities were 6.6% of Total financial liabilities at fair value. |
(5) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
Derivative Assets at Fair Value as of September 2010 | ||||||||||||||||||||
Cross-Level |
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Interest rates
|
$ | 20 | $ | 651,491 | $ | 124 | $ | | $ | 651,635 | ||||||||||
Credit
|
| 122,212 | 13,258 | | 135,470 | |||||||||||||||
Currencies
|
| 90,610 | 1,775 | | 92,385 | |||||||||||||||
Commodities
|
| 35,365 | 1,870 | | 37,235 | |||||||||||||||
Equities
|
121 | 73,322 | 1,296 | | 74,739 | |||||||||||||||
Gross fair value of derivative assets
|
141 | 973,000 | 18,323 | | 991,464 | |||||||||||||||
Counterparty
netting (1)
|
| (781,093 | ) | (5,571 | ) | (2,241 | ) (3) | (788,905 | ) | |||||||||||
Subtotal
|
$ | 141 | $ | 191,907 | $ | 12,752 | $ | (2,241 | ) | $ | 202,559 | |||||||||
Cash collateral
netting (2)
|
(121,085 | ) | ||||||||||||||||||
Fair value included in trading
assets, at fair value |
$ | 81,474 | ||||||||||||||||||
Derivative Liabilities at Fair Value as of September 2010 | ||||||||||||||||||||
Cross-Level |
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Interest rates
|
$ | 11 | $ | 579,721 | $ | 397 | $ | | $ | 580,129 | ||||||||||
Credit
|
| 104,792 | 5,844 | | 110,636 | |||||||||||||||
Currencies
|
| 79,650 | 845 | | 80,495 | |||||||||||||||
Commodities
|
| 38,696 | 2,354 | | 41,050 | |||||||||||||||
Equities
|
105 | 56,562 | 2,570 | | 59,237 | |||||||||||||||
Gross fair value of derivative liabilities
|
116 | 859,421 | 12,010 | | 871,547 | |||||||||||||||
Counterparty
netting (1)
|
| (781,093 | ) | (5,571 | ) | (2,241 | ) (3) | (788,905 | ) | |||||||||||
Subtotal
|
$ | 116 | $ | 78,328 | $ | 6,439 | $ | (2,241 | ) | $ | 82,642 | |||||||||
Cash collateral
netting (2)
|
(18,875 | ) | ||||||||||||||||||
Fair value included in trading
liabilities, at fair value |
$ | 63,767 | ||||||||||||||||||
(1) | Represents the netting of receivable balances with payable balances for the same counterparty pursuant to enforceable netting agreements. | |
(2) | Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements. | |
(3) | Represents the netting of receivable balances with payable balances for the same counterparty across levels of the fair value hierarchy pursuant to enforceable netting agreements. |
Level 3 Unrealized Gains/(Losses) | ||||||||||||||||
Three Months |
Nine Months |
|||||||||||||||
Ended September | Ended September | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Cash instruments assets
|
$ | 522 | $ | 377 | $ | 1,497 | $ | (4,703 | ) | |||||||
Cash instruments liabilities
|
(6 | ) | 180 | (56 | ) | 433 | ||||||||||
Net unrealized gains/(losses) on level 3 cash instruments
|
516 | 557 | 1,441 | (4,270 | ) | |||||||||||
Derivative contracts net
|
(272 | ) | (639 | ) | 4,100 | (1,216 | ) | |||||||||
Securities purchased under agreements to resell
|
21 | | 21 | | ||||||||||||
Receivables from customers and counterparties
|
(17 | ) | | (66 | ) | | ||||||||||
Other secured financings
|
(61 | ) | (295 | ) | (25 | ) | (720 | ) | ||||||||
Unsecured
short-term
borrowings
|
(207 | ) | (193 | ) | 37 | (137 | ) | |||||||||
Unsecured
long-term
borrowings
|
(202 | ) | (217 | ) | (66 | ) | (268 | ) | ||||||||
Other liabilities and accrued expenses
|
(147 | ) | (22 | ) | (121 | ) | 56 | |||||||||
Total level 3 unrealized gains/(losses)
|
$ | (369 | ) | $ | (809 | ) | $ | 5,321 | $ | (6,555 | ) | |||||
| A derivative contract with level 1 and/or level 2 inputs is classified as a level 3 financial instrument in its entirety if it has at least one significant level 3 input. | |
| If there is one significant level 3 input, the entire gain or loss from adjusting only observable inputs (i.e., level 1 and level 2) is still classified as level 3. | |
| Gains or losses that have been reported in level 3 resulting from changes in level 1 or level 2 inputs are frequently offset by gains or losses attributable to instruments classified within level 1 or level 2 or cash instruments reported within level 3 of the fair value hierarchy. |
Level 3 Financial Assets and Financial Liabilities at Fair Value | ||||||||||||||||||||||||
Net unrealized |
||||||||||||||||||||||||
gains/(losses) |
Net |
|||||||||||||||||||||||
relating to |
purchases, |
|||||||||||||||||||||||
Balance, |
instruments still |
issuances |
Net transfers |
Balance, |
||||||||||||||||||||
beginning |
Net realized |
held at the |
and |
in and/or
out |
end of |
|||||||||||||||||||
of period | gains/(losses) | reporting date | settlements | of level 3 | period | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Three Months Ended September 2010
|
||||||||||||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||||||
Loans and securities backed by commercial real estate
|
$ | 3,868 | $ | 46 | $ | 25 | $ | 128 | $ | (77 | ) (4) | $ | 3,990 | |||||||||||
Loans and securities backed by residential real estate
|
2,124 | 45 | 25 | (44 | ) | 99 | (4) | 2,249 | ||||||||||||||||
Loan portfolios
|
1,258 | 22 | | (16 | ) | 2 | (4) | 1,266 | ||||||||||||||||
Bank loans and bridge loans
|
9,573 | 165 | 157 | (346 | ) | (16 | ) (4) | 9,533 | ||||||||||||||||
Corporate debt securities
|
2,592 | 69 | 96 | (428 | ) | 22 | (4) | 2,351 | ||||||||||||||||
State and municipal obligations
|
825 | 2 | 20 | (55 | ) | 66 | (4) | 858 | ||||||||||||||||
Other debt obligations
|
1,376 | 26 | 17 | (174 | ) | 159 | (4) | 1,404 | ||||||||||||||||
Equities and convertible debentures
|
10,335 | 20 | 182 | 86 | 995 | (5) | 11,618 | |||||||||||||||||
Total cash instruments assets
|
31,951 | 395 | (1) | 522 | (1) | (849 | ) | 1,250 | 33,269 | |||||||||||||||
Cash instruments liabilities
|
(595 | ) | 10 | (2) | (6 | ) (2) | 47 | 49 | (4) | (495 | ) | |||||||||||||
Derivative contracts:
|
||||||||||||||||||||||||
Interest rates net
|
(115 | ) | (21 | ) | 24 | 18 | (110 | ) (4) | (204 | ) | ||||||||||||||
Credit net
|
8,526 | 133 | (378 | ) | (1,075 | ) | 520 | (6) | 7,726 | |||||||||||||||
Currencies net
|
1,100 | (12 | ) | (137 | ) | 12 | (323 | ) (4) | 640 | |||||||||||||||
Commodities net
|
(271 | ) | (54 | ) | 144 | (253 | ) | (64 | ) (4) | (498 | ) | |||||||||||||
Equities net
|
(1,368 | ) | (5 | ) | 75 | (119 | ) | 66 | (4) | (1,351 | ) | |||||||||||||
Total derivative contracts net
|
7,872 | 41 | (2) | (272 | ) (2)(3) | (1,417 | ) | 89 | 6,313 | |||||||||||||||
Securities purchased under agreements to resell
|
| (13 | ) (2) | 21 | (2) | (56 | ) | 234 | (4) | 186 | ||||||||||||||
Receivables from customers and counterparties
|
218 | 6 | (2) | (17 | ) (2) | | 77 | (4) | 284 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value
|
(1,419 | ) | | | (652 | ) | | (4) | (2,071 | ) | ||||||||||||||
Other secured financings
|
(8,086 | ) | | (2) | (61 | ) (2) | (7 | ) | 173 | (4) | (7,981 | ) | ||||||||||||
Unsecured
short-term
borrowings
|
(2,768 | ) | 10 | (2) | (207 | ) (2) | (27 | ) | 101 | (4) | (2,891 | ) | ||||||||||||
Unsecured
long-term
borrowings
|
(1,899 | ) | 1 | (2) | (202 | ) (2) | (108 | ) | 305 | (4) | (1,903 | ) | ||||||||||||
Other liabilities and accrued expenses
|
(2,386 | ) | (3 | ) (2) | (147 | ) (2) | 154 | (94 | ) (4) | (2,476 | ) |
Level 3 Financial Assets and Financial Liabilities at Fair Value | ||||||||||||||||||||||||
Net unrealized |
||||||||||||||||||||||||
gains/(losses) |
Net |
|||||||||||||||||||||||
relating to |
purchases, |
|||||||||||||||||||||||
Balance, |
instruments still |
issuances |
Net transfers |
Balance, |
||||||||||||||||||||
beginning |
Net realized |
held at the |
and |
in and/or
out |
end of |
|||||||||||||||||||
of period | gains/(losses) | reporting date | settlements | of level 3 | period | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Nine Months Ended September 2010
|
||||||||||||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||||||
Loans and securities backed by commercial real estate
|
$ | 4,620 | $ | 178 | $ | 132 | $ | (1,227 | ) | $ | 287 | (4) | $ | 3,990 | ||||||||||
Loans and securities backed by residential real estate
|
1,880 | 125 | 139 | 11 | 94 | (4) | 2,249 | |||||||||||||||||
Loan portfolios
|
1,364 | 61 | (10 | ) | (219 | ) | 70 | (4) | 1,266 | |||||||||||||||
Bank loans and bridge loans
|
9,560 | 449 | 406 | (1,095 | ) | 213 | (4) | 9,533 | ||||||||||||||||
Corporate debt securities
|
2,235 | 228 | 149 | 285 | (546 | ) (7) | 2,351 | |||||||||||||||||
State and municipal obligations
|
1,114 | | 44 | (379 | ) | 79 | (4) | 858 | ||||||||||||||||
Other debt obligations
|
2,235 | (7 | ) | 181 | (249 | ) | (756 | ) (8) | 1,404 | |||||||||||||||
Equities and convertible debentures
|
11,871 | 120 | 456 | (563 | ) | (266 | ) (4) | 11,618 | ||||||||||||||||
Total cash instruments assets
|
34,879 | 1,154 | (1) | 1,497 | (1) | (3,436 | ) | (825 | ) | 33,269 | ||||||||||||||
Cash instruments liabilities
|
(572 | ) | 24 | (2) | (56 | ) (2) | 80 | 29 | (4) | (495 | ) | |||||||||||||
Derivative contracts:
|
||||||||||||||||||||||||
Interest rates net
|
(71 | ) | (57 | ) | 62 | 48 | (186 | ) (4) | (204 | ) | ||||||||||||||
Credit net
|
6,366 | 328 | 3,599 | (3,054 | ) | 487 | (6) | 7,726 | ||||||||||||||||
Currencies net
|
215 | 368 | (27 | ) | (369 | ) | 453 | (9) | 640 | |||||||||||||||
Commodities net
|
(90 | ) | (250 | ) | 113 | (27 | ) | (244 | ) (4) | (498 | ) | |||||||||||||
Equities net
|
(1,224 | ) | (44 | ) | 353 | (440 | ) | 4 | (4) | (1,351 | ) | |||||||||||||
Total derivative contracts net
|
5,196 | 345 | (2) | 4,100 | (2)(3) | (3,842 | ) | 514 | 6,313 | |||||||||||||||
Securities purchased under agreements to resell
|
| (13 | ) (2) | 21 | (2) | (56 | ) | 234 | (4) | 186 | ||||||||||||||
Receivables from customers and counterparties
|
| 16 | (2) | (66 | ) (2) | | 334 | (4) | 284 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value
|
(394 | ) | | | (1,677 | ) | | (4) | (2,071 | ) | ||||||||||||||
Other secured financings
|
(6,756 | ) | (21 | ) (2) | (25 | ) (2) | (1,181 | ) | 2 | (4) | (7,981 | ) | ||||||||||||
Unsecured
short-term
borrowings
|
(2,310 | ) | (52 | ) (2) | 37 | (2) | 378 | (944 | ) (10) | (2,891 | ) | |||||||||||||
Unsecured
long-term
borrowings
|
(3,077 | ) | (15 | ) (2) | (66 | ) (2) | (87 | ) | 1,342 | (11) | (1,903 | ) | ||||||||||||
Other liabilities and accrued expenses
|
(1,913 | ) | (8 | ) (2) | (121 | ) (2) | 153 | (587 | ) (12) | (2,476 | ) |
(1) | The aggregate amounts include approximately $506 million and $411 million reported in Trading and principal investments and Interest income, respectively, in the condensed consolidated statement of earnings for the three months ended September 2010. The aggregate amounts include approximately $1.67 billion and $979 million reported in Trading and principal investments and Interest income, respectively, in the condensed consolidated statement of earnings for the nine months ended September 2010. | |
(2) | Substantially all is reported in Trading and principal investments in the condensed consolidated statements of earnings. | |
(3) | Principally resulted from changes in level 2 inputs. | |
(4) | Includes no individually significant transfers into or out of level 3 during the three and nine months ended September 2010. | |
(5) | Principally reflects transfers from level 2 within the fair value hierarchy of certain private equity investments, reflecting reduced transparency of prices as a result of less trading activity for these financial instruments. | |
(6) | Principally reflects transfers from level 2 within the fair value hierarchy of certain credit default swaps reflecting reduced transparency of prices for the underlying instruments as a result of less trading activity. | |
(7) | Principally reflects a reduction in financial instruments as a result of the consolidation of a VIE, which holds identifiable intangible assets, as a result of the adoption of ASU No. 2009-17. Such assets are included in Other assets in the condensed consolidated statements of financial condition. | |
(8) | Principally reflects a reduction in financial instruments as a result of the consolidation of a VIE, which holds real estate assets. Such assets are included in Other assets in the condensed consolidated statements of financial condition. | |
(9) | Principally reflects transfers from level 2 within the fair value hierarchy of certain currency derivative assets reflecting reduced transparency of the correlation inputs used to value these financial instruments as a result of less trading activity. |
(11) | Upon the firms consolidation of certain VIEs as a result of the adoption of ASU No. 2009-17, the firms borrowings from such VIEs, substantially all of which were level 3, became intercompany borrowings and were eliminated in consolidation. |
(12) | Principally reflects an increase related to subordinated liabilities issued by VIEs which were consolidated upon the adoption of ASU No. 2009-17. |
Level 3 Financial Assets and Financial Liabilities at Fair Value | ||||||||||||||||||||||||
Net unrealized |
||||||||||||||||||||||||
gains/(losses) |
Net |
|||||||||||||||||||||||
relating to |
purchases, |
|||||||||||||||||||||||
Balance, |
instruments still |
issuances |
Net transfers |
Balance, |
||||||||||||||||||||
beginning |
Net realized |
held at the |
and |
in and/or
out |
end of |
|||||||||||||||||||
of period | gains/(losses) | reporting date | settlements | of level 3 | period | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Three Months Ended September 2009
|
||||||||||||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||||||
Loans and securities backed by commercial real estate
|
$ | 6,839 | $ | 95 | $ | (259 | ) | $ | (370 | ) | $ | (193 | ) | $ | 6,112 | |||||||||
Loans and securities backed by residential real estate
|
1,862 | 49 | 62 | (40 | ) | (90 | ) | 1,843 | ||||||||||||||||
Loan portfolios
|
1,774 | 32 | (4 | ) | (126 | ) | | 1,676 | ||||||||||||||||
Bank loans and bridge loans
|
9,669 | 182 | 409 | (493 | ) | 14 | 9,781 | |||||||||||||||||
Corporate debt securities
|
2,372 | 22 | 39 | (327 | ) | (248 | ) | 1,858 | ||||||||||||||||
State and municipal obligations
|
1,430 | (2 | ) | 23 | (39 | ) | (148 | ) | 1,264 | |||||||||||||||
Other debt obligations
|
2,803 | 26 | 20 | (236 | ) | (127 | ) | 2,486 | ||||||||||||||||
Equities and convertible debentures
|
12,679 | 5 | 87 | 190 | (480 | ) (4) | 12,481 | |||||||||||||||||
Total cash instruments assets
|
39,428 | 409 | (1) | 377 | (1) | (1,441 | ) | (1,272 | ) | 37,501 | ||||||||||||||
Cash instruments liabilities
|
(1,020 | ) | 10 | (2) | 180 | (2) | 250 | 38 | (542 | ) | ||||||||||||||
Derivative contracts net
|
3,076 | 170 | (2) | (639 | ) (2)(3) | 367 | 1,187 | (5) | 4,161 | |||||||||||||||
Other secured financings
|
(8,067 | ) | (4 | ) (2) | (295 | ) (2) | 491 | (27 | ) | (7,902 | ) | |||||||||||||
Unsecured
short-term
borrowings
|
(2,229 | ) | (61 | ) (2) | (193 | ) (2) | 172 | 370 | (1,941 | ) | ||||||||||||||
Unsecured
long-term
borrowings
|
(3,427 | ) | (5 | ) (2) | (217 | ) (2) | 85 | 135 | (3,429 | ) | ||||||||||||||
Other liabilities and accrued expenses
|
(1,644 | ) | | (2) | (22 | ) (2) | (156 | ) | | (1,822 | ) |
Level 3 Financial Assets and Financial Liabilities at Fair Value | ||||||||||||||||||||||||
Net unrealized |
||||||||||||||||||||||||
gains/(losses) |
Net |
|||||||||||||||||||||||
relating to |
purchases, |
|||||||||||||||||||||||
Balance, |
instruments still |
issuances |
Net transfers |
Balance, |
||||||||||||||||||||
beginning |
Net realized |
held at the |
and |
in and/or
out |
end of |
|||||||||||||||||||
of period | gains/(losses) | reporting date | settlements | of level 3 | period | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Nine Months Ended September 2009
|
||||||||||||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||||||
Loans and securities backed by commercial real estate
|
$ | 9,170 | $ | 202 | $ | (1,464 | ) | $ | (1,481 | ) | $ | (315 | ) | $ | 6,112 | |||||||||
Loans and securities backed by residential real estate
|
1,927 | 79 | 66 | (395 | ) | 166 | 1,843 | |||||||||||||||||
Loan portfolios
|
4,266 | 148 | (300 | ) | (891 | ) | (1,547 | ) (6) | 1,676 | |||||||||||||||
Bank loans and bridge loans
|
11,169 | 559 | (194 | ) | (1,963 | ) | 210 | 9,781 | ||||||||||||||||
Corporate debt securities
|
2,734 | 152 | (192 | ) | (525 | ) | (311 | ) | 1,858 | |||||||||||||||
State and municipal obligations
|
1,356 | (23 | ) | 33 | (424 | ) | 322 | 1,264 | ||||||||||||||||
Other debt obligations
|
3,903 | 123 | (200 | ) | (1,054 | ) | (286 | ) | 2,486 | |||||||||||||||
Equities and convertible debentures
|
15,127 | (14 | ) | (2,452 | ) | 586 | (766 | ) (4) | 12,481 | |||||||||||||||
Total cash instruments assets
|
49,652 | 1,226 | (1) | (4,703 | ) (1) | (6,147 | ) | (2,527 | ) | 37,501 | ||||||||||||||
Cash instruments liabilities
|
(1,727 | ) | 5 | (2) | 433 | (2) | 560 | 187 | (542 | ) | ||||||||||||||
Derivative contracts net
|
3,315 | 547 | (2) | (1,216 | ) (2)(3) | 1,928 | (413 | ) | 4,161 | |||||||||||||||
Other secured financings
|
(4,039 | ) | (24 | ) (2) | (720 | ) (2) | (564 | ) | (2,555 | ) (7) | (7,902 | ) | ||||||||||||
Unsecured
short-term
borrowings
|
(4,712 | ) | (70 | ) (2) | (137 | ) (2) | (837 | ) | 3,815 | (7) | (1,941 | ) | ||||||||||||
Unsecured
long-term
borrowings
|
(1,689 | ) | (45 | ) (2) | (268 | ) (2) | 318 | (1,745 | ) (7) | (3,429 | ) | |||||||||||||
Other liabilities and accrued expenses
|
| (21 | ) (2) | 56 | (2) | (904 | ) | (953 | ) (8) | (1,822 | ) |
(1) | The aggregate amounts include approximately $317 million and $469 million reported in Trading and principal investments and Interest income, respectively, in the condensed consolidated statement of earnings for the three months ended September 2009. The aggregate amounts include approximately $(4.92) billion and $1.44 billion reported in Trading and principal investments and Interest income, respectively, in the condensed consolidated statement of earnings for the nine months ended September 2009. |
(2) | Substantially all is reported in Trading and principal investments in the condensed consolidated statements of earnings. |
(3) | Primarily resulted from changes in level 2 inputs. |
(4) | Principally reflects transfers to level 2 within the fair value hierarchy of certain private equity investments, reflecting improved transparency of prices for these financial instruments, primarily as a result of trading activity. |
(5) | Principally reflects transfers from level 2 within the fair value hierarchy of credit derivative assets, reflecting reduced transparency of certain credit spread inputs used to value these financial instruments, partially offset by transfers to level 2 within the fair value hierarchy of equity derivative assets, reflecting improved transparency of the equity index volatility inputs used to value these financial instruments. |
(6) | Principally reflects the deconsolidation of certain loan portfolios for which the firm did not bear economic exposure. |
(7) | Principally reflects transfers from level 3 unsecured short-term borrowings to level 3 other secured financings and level 3 unsecured long-term borrowings related to changes in the terms of certain notes. |
(8) | Principally reflects transfers from level 2 within the fair value hierarchy of certain insurance contracts, reflecting reduced transparency of mortality curve inputs used to value these financial instruments as a result of less observable trading activity. |
As of September 2010 | As of December 2009 | |||||||||||||||||||||||
Number |
Number |
|||||||||||||||||||||||
Derivative |
Derivative |
of |
Derivative |
Derivative |
of |
|||||||||||||||||||
Assets | Liabilities | Contracts | Assets | Liabilities | Contracts | |||||||||||||||||||
(in millions, except number of contracts) | ||||||||||||||||||||||||
Derivative contracts for trading activities | ||||||||||||||||||||||||
Interest rates
|
$ | 622,234 | $ | 580,121 | 266,933 | $ | 458,614 | $ | 407,125 | 270,707 | ||||||||||||||
Credit
|
135,470 | 110,636 | 389,256 | 164,669 | 134,810 | 443,450 | ||||||||||||||||||
Currencies
|
92,384 | 80,399 | 247,859 | 77,223 | 62,413 | 171,760 | ||||||||||||||||||
Commodities
|
37,235 | 41,050 | 76,323 | 47,234 | 48,163 | 73,010 | ||||||||||||||||||
Equities
|
74,739 | 59,237 | 333,977 | 67,559 | 53,207 | 237,625 | ||||||||||||||||||
Subtotal
|
$ | 962,062 | $ | 871,443 | 1,314,348 | $ | 815,299 | $ | 705,718 | 1,196,552 | ||||||||||||||
Derivative contracts accounted for as hedges | ||||||||||||||||||||||||
Interest rates
|
$ | 29,401 | $ | 8 | 935 | $ | 19,563 | $ | 1 | 806 | ||||||||||||||
Currencies
|
1 | 96 | 73 | 8 | 47 | 58 | ||||||||||||||||||
Subtotal
|
$ | 29,402 | $ | 104 | 1,008 | $ | 19,571 | $ | 48 | 864 | ||||||||||||||
Gross fair value of derivative contracts
|
$ | 991,464 | $ | 871,547 | 1,315,356 | $ | 834,870 | $ | 705,766 | 1,197,416 | ||||||||||||||
Counterparty
netting (1)
|
(788,905 | ) | (788,905 | ) | (635,014 | ) | (635,014 | ) | ||||||||||||||||
Cash collateral
netting (2)
|
(121,085 | ) | (18,875 | ) | (124,603 | ) | (14,743 | ) | ||||||||||||||||
Fair value included in trading assets,
at fair value |
$ | 81,474 | $ | 75,253 | ||||||||||||||||||||
Fair value included in trading liabilities,
at fair value |
$ | 63,767 | $ | 56,009 | ||||||||||||||||||||
(1) | Represents the netting of receivable balances with payable balances for the same counterparty pursuant to enforceable netting agreements. |
(2) | Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements. |
Three Months |
Nine Months |
|||||||||||||||
Ended September | Ended September | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Interest rates
|
$ | 3,612 | $ | 2,295 | $ | (1,116 | ) | $ | 7,170 | |||||||
Credit
|
1,642 | 2,189 | 8,121 | 5,303 | ||||||||||||
Currencies (1)
|
(4,351 | ) | (1,728 | ) | 2,440 | (2,149 | ) | |||||||||
Equities
|
2,651 | 2,983 | 4,600 | 5,825 | ||||||||||||
Commodities and other
|
554 | 964 | 1,715 | 4,307 | ||||||||||||
Total
|
$ | 4,108 | $ | 6,703 | $ | 15,760 | $ | 20,456 | ||||||||
(1) | Includes gains/(losses) on currency contracts used to economically hedge positions included in other product types in this table. |
| Credit default swaps. Single-name credit default swaps protect the buyer against the loss of principal on one or more bonds, loans or mortgages (reference obligations) in the event of a default by the issuer (reference entity). The buyer of protection pays an initial or periodic premium to the seller and receives credit default protection for the period of the contract. If there is no credit default event, as defined by the specific derivative contract, then the seller of protection makes no payments to the buyer of protection. However, if a credit default event occurs, the seller of protection will be required to make a payment to the buyer of protection. Typical credit default events requiring payment include bankruptcy of the reference credit entity, failure to pay the principal or interest, and restructuring of the relevant obligations of the reference entity. |
| Credit indices, baskets and tranches. Credit derivatives may reference a basket of single-name credit default swaps or a broad-based index. Typically, in the event of a default of one of the underlying reference obligations, the protection seller will pay to the protection buyer a pro-rata portion of a transactions total notional amount relating to the underlying defaulted reference obligation. In tranched transactions, the credit risk of a basket or index is separated into various portions each having different levels of subordination. The most junior tranches cover initial defaults, and once losses exceed the notional amount of these tranches, the excess is covered by the next most senior tranche in the capital structure. | |
| Total return swaps. A total return swap transfers the risks relating to economic performance of a reference obligation from the protection buyer to the protection seller. Typically, the protection buyer receives from the protection seller a floating rate of interest and protection against any reduction in fair value of the reference obligation, and in return the protection seller receives the cash flows associated with the reference obligation, plus any increase in the fair value of the reference obligation. |
| Credit options. In a credit option, the option writer assumes the obligation to purchase or sell a reference obligation at a specified price or credit spread. The option purchaser buys the right to sell the reference obligation to, or purchase it from, the option writer. The payments on credit options depend either on a particular credit spread or the price of the reference obligation. |
Maximum Payout/Notional |
||||||||||||||||||||||||||||||||||||
Maximum Payout/Notional Amount |
Amount of Purchased |
Fair Value of |
||||||||||||||||||||||||||||||||||
of Written Credit Derivatives by Tenor (1) | Credit Derivatives | Written Credit Derivatives | ||||||||||||||||||||||||||||||||||
Offsetting |
Other |
|||||||||||||||||||||||||||||||||||
5 Years |
Purchased |
Purchased |
Net |
|||||||||||||||||||||||||||||||||
0 - 12 |
1 - 5 |
or |
Credit |
Credit |
Asset/ |
|||||||||||||||||||||||||||||||
Months | Years | Greater | Total | Derivatives (2) | Derivatives (3) | Asset | Liability | (Liability) | ||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||
As of September 2010
|
||||||||||||||||||||||||||||||||||||
Credit spread on underlying (basis points) (4) |
||||||||||||||||||||||||||||||||||||
0-250
|
$ | 237,103 | $ | 1,109,624 | $ | 319,563 | $ | 1,666,290 | $ | 1,561,087 | $ | 226,091 | $ | 26,854 | $ | 16,957 | $ | 9,897 | ||||||||||||||||||
251-500
|
14,204 | 176,055 | 58,067 | 248,326 | 215,173 | 35,448 | 7,400 | 8,709 | (1,309 | ) | ||||||||||||||||||||||||||
501-1,000
|
13,114 | 104,947 | 44,075 | 162,136 | 138,377 | 23,489 | 2,610 | 12,627 | (10,017 | ) | ||||||||||||||||||||||||||
Greater than 1,000
|
8,684 | 70,375 | 17,670 | 96,729 | 74,399 | 28,861 | 827 | 39,462 | (38,635 | ) | ||||||||||||||||||||||||||
Total
|
$ | 273,105 | $ | 1,461,001 | $ | 439,375 | $ | 2,173,481 | $ | 1,989,036 | $ | 313,889 | $ | 37,691 | $ | 77,755 | $ | (40,064 | ) (5) | |||||||||||||||||
As of December 2009
|
||||||||||||||||||||||||||||||||||||
Credit spread on underlying (basis points) (4) |
||||||||||||||||||||||||||||||||||||
0-250
|
$ | 283,353 | $ | 1,342,649 | $ | 414,809 | $ | 2,040,811 | $ | 1,884,864 | $ | 299,329 | $ | 39,740 | $ | 13,441 | $ | 26,299 | ||||||||||||||||||
251-500
|
15,151 | 142,732 | 39,337 | 197,220 | 182,583 | 27,194 | 5,008 | 6,816 | (1,808 | ) | ||||||||||||||||||||||||||
501-1,000
|
10,364 | 101,621 | 34,194 | 146,179 | 141,317 | 5,673 | 2,841 | 12,448 | (9,607 | ) | ||||||||||||||||||||||||||
Greater than 1,000
|
20,262 | 107,768 | 31,208 | 159,238 | 117,914 | 48,699 | 1,524 | 60,279 | (58,755 | ) | ||||||||||||||||||||||||||
Total
|
$ | 329,130 | $ | 1,694,770 | $ | 519,548 | $ | 2,543,448 | $ | 2,326,678 | $ | 380,895 | $ | 49,113 | $ | 92,984 | $ | (43,871 | ) (5) | |||||||||||||||||
(1) | Tenor is based on expected duration for mortgage-related credit derivatives and on remaining contractual maturity for other credit derivatives. |
(2) | Offsetting purchased credit derivatives represent the notional amount of purchased credit derivatives to the extent they economically hedge written credit derivatives with identical underlyings. |
(3) | Comprised of purchased protection in excess of the amount of written protection on identical underlyings and purchased protection on other underlyings on which the firm has not written protection. |
(4) | Credit spread on the underlying, together with the tenor of the contract, are indicators of payment/performance risk. For example, the firm is least likely to pay or otherwise be required to perform where the credit spread on the underlying is 0-250 basis points and the tenor is 0-12 Months. The likelihood of payment or performance is generally greater as the credit spread on the underlying and tenor increase. |
(5) | These net liabilities differ from the carrying values related to credit derivatives in the firms condensed consolidated statements of financial condition because they exclude the effects of both netting under enforceable netting agreements and netting of cash collateral posted or received pursuant to credit support agreements. |
Three Months |
Nine Months |
|||||||||||||||
Ended September | Ended September | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Net gains/(losses) including hedges
|
$ | (178 | ) | $ | (278 | ) | $ | 319 | $ | (823 | ) | |||||
Net gains/(losses) excluding hedges
|
(188 | ) | (285 | ) | 326 | (830 | ) |
Three Months |
Nine Months |
|||||||||||||||
Ended September | Ended September | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Unsecured
long-term
borrowings (1)
|
$ | (122 | ) | $ | (209 | ) | $ | 248 | $ | (651 | ) | |||||
Other secured
financings (2)
|
(69 | ) | (349 | ) | (15 | ) | (766 | ) | ||||||||
Unsecured
short-term
borrowings (3)
|
(22 | ) | (44 | ) | 52 | (138 | ) | |||||||||
Receivables from customers and
counterparties (4)
|
(12 | ) | 241 | (105 | ) | 323 | ||||||||||
Other liabilities and accrued
expenses (5)(6)
|
(103 | ) | (180 | ) | (176 | ) | (260 | ) | ||||||||
Other (7)
|
(18 | ) | 53 | (1 | ) | 61 | ||||||||||
Total (8)
|
$ | (346 | ) | $ | (488 | ) | $ | 3 | $ | (1,431 | ) | |||||
(1) | Excludes losses of $57 million and $1.45 billion for the three months ended September 2010 and September 2009, respectively, and $1.65 billion and $3.17 billion for the nine months ended September 2010 and September 2009, respectively, related to the embedded derivative component of hybrid financial instruments. Such losses would have been recognized even if the firm had not elected to account for the entire hybrid instrument at fair value under the fair value option. | |
(2) | Excludes gains/(losses) of $(53) million and $34 million for the three months ended September 2010 and September 2009, respectively, and $(58) million and $41 million for the nine months ended September 2010 and September 2009, respectively, related to financings recorded as a result of transactions that were accounted for as secured financings rather than sales. Changes in the fair value of these secured financings are offset by changes in the fair value of the related financial instruments included in Trading assets, at fair value in the condensed consolidated statements of financial condition. | |
(3) | Excludes losses of $1.20 billion and $893 million for the three months ended September 2010 and September 2009, respectively, and $445 million and $2.37 billion for the nine months ended September 2010 and September 2009, respectively, related to the embedded derivative component of hybrid financial instruments. Such gains and losses would have been recognized even if the firm had not elected to account for the entire hybrid instrument at fair value under the fair value option. | |
(4) | Primarily consists of gains/(losses) on certain reinsurance contracts. | |
(5) | Excludes gains/(losses) of $(54) million and $97 million for the three and nine months ended September 2010, respectively, related to subordinated liabilities issued by consolidated VIEs. Changes in the fair value of these financial instruments are offset by changes in the fair value of the financial assets held by the consolidated VIEs. | |
(6) | Primarily consists of losses on certain insurance and reinsurance contracts. | |
(7) | Primarily consists of gains/(losses) on resale and repurchase agreements, securities borrowed and loaned within Trading and Principal Investments, and deposits. | |
(8) | Reported in Trading and principal investments in the condensed consolidated statements of earnings. The amounts exclude contractual interest, which is included in Interest income and Interest expense in the condensed consolidated statements of earnings, for all instruments other than hybrid financial instruments. |
As of September 2010 | As of December 2009 | |||||||||||||||
Fair Value of |
Unfunded |
Fair Value of |
Unfunded |
|||||||||||||
Investments | Commitments | Investments | Commitments | |||||||||||||
(in millions) | ||||||||||||||||
Private equity
funds (1)
|
$ | 7,726 | $ | 5,207 | $ | 8,229 | $ | 5,722 | ||||||||
Private debt
funds (2)
|
4,383 | 3,974 | 3,628 | 4,048 | ||||||||||||
Hedge
funds (3)
|
3,075 | | 3,133 | | ||||||||||||
Real estate and other
funds (4)
|
1,107 | 2,214 | 939 | 2,398 | ||||||||||||
Total
|
$ | 16,291 | $ | 11,395 | $ | 15,929 | $ | 12,168 | ||||||||
(1) | These funds primarily invest in a broad range of industries worldwide in a variety of situations, including leveraged buyouts, recapitalizations, and growth investments. | |
(2) | These funds generally invest in fixed income instruments and are focused on providing private high-yield capital for mid to large-sized leveraged and management buyout transactions, recapitalizations, financings, refinancings, acquisitions and restructurings for private equity firms, private family companies and corporate issuers. | |
(3) | These funds are primarily multi-disciplinary hedge funds that employ a fundamental bottom-up investment approach across various asset classes and strategies including long/short equity, credit, convertibles, risk arbitrage/special situations and capital structure arbitrage. | |
(4) | These funds invest globally, primarily in real estate companies, loan portfolios, debt recapitalizations and direct property. |
As of | ||||||||
September |
December |
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Other secured financings
(short-term) (1)(2)
|
$ | 14,646 | $ | 12,931 | ||||
Other secured financings
(long-term):
|
||||||||
2011
|
222 | 3,832 | ||||||
2012
|
5,617 | 1,726 | ||||||
2013
|
1,328 | 1,518 | ||||||
2014
|
2,062 | 1,617 | ||||||
2015
|
469 | 255 | ||||||
2016-thereafter
|
2,249 | 2,255 | ||||||
Total other secured financings
(long-term) (3)(4)(5)
|
11,947 | 11,203 | ||||||
Total other secured
financings (6)(7)
|
$ | 26,593 | $ | 24,134 | ||||
(1) | As of September 2010 and December 2009, consists of U.S. dollar-denominated financings of $3.65 billion and $6.47 billion (including $3.53 billion and $6.15 billion at fair value) and non-U.S. dollar-denominated financings of $11.00 billion and $6.46 billion (including $3.42 billion and $1.08 billion at fair value), respectively. As of September 2010 and December 2009, after giving effect to hedging activities, the U.S. dollar-denominated financings not at fair value had a weighted average interest rate of 2.88% and 3.44%, respectively, and the non-U.S. dollar-denominated financings not at fair value had a weighted average interest rate of 0.45% and 1.57%, respectively. | |
(2) | Includes other secured financings maturing within one year of the financial statement date and other secured financings that are redeemable within one year of the financial statement date at the option of the holder. | |
(3) | As of September 2010 and December 2009, consists of U.S. dollar-denominated financings of $8.71 billion and $7.28 billion (including $7.32 billion and $5.90 billion at fair value) and non-U.S. dollar-denominated financings of $3.24 billion and $3.92 billion (including $2.18 billion and $2.10 billion at fair value), respectively. As of September 2010 and December 2009, after giving effect to hedging activities, the U.S. dollar-denominated financings not at fair value had a weighted average interest rate of 2.14% and 1.83%, respectively, and the non-U.S. dollar-denominated financings not at fair value had a weighted average interest rate of 2.51% and 2.30%, respectively. | |
(4) | Secured long-term financings that are repayable prior to maturity at the option of the firm are reflected at their contractual maturity dates. Secured long-term financings that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable. | |
(5) | The aggregate contractual principal amount of other secured financings (long-term) for which the fair value option was elected, primarily consisting of transfers of financial assets accounted for as financings rather than sales, debt raised through the William Street credit extension program and certain other nonrecourse financings, exceeded the related fair value by $342 million as of September 2010. | |
(6) | As of September 2010 and December 2009, $23.35 billion and $18.25 billion, respectively, of these financings were collateralized by trading assets and $3.24 billion and $5.88 billion, respectively, by other assets (primarily real estate and cash). Other secured financings include $9.01 billion and $10.63 billion of nonrecourse obligations as of September 2010 and December 2009, respectively. | |
(7) | As of September 2010 and December 2009, other secured financings include $11.23 billion and $9.51 billion, respectively, related to transfers of financial assets accounted for as financings rather than sales. Such financings were collateralized by financial assets included in Trading assets, at fair value in the condensed consolidated statements of financial condition of $11.46 billion and $9.78 billion as of September 2010 and December 2009, respectively. |
Note 4. | Securitization Activities and Variable Interest Entities |
As of September 2010 | As of December 2009 | |||||||||||||||||||||||
Outstanding |
Fair Value of |
Fair Value of |
Outstanding |
Fair Value of |
Fair Value of |
|||||||||||||||||||
Principal |
Retained |
Purchased |
Principal |
Retained |
Purchased |
|||||||||||||||||||
Amount | Interests | Interests (1) | Amount | Interests | Interests (1) | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Residential
mortgage-backed (2)
|
$ | 63,164 | $ | 4,095 | $ | 6 | $ | 59,410 | $ | 3,956 | $ | 17 | ||||||||||||
Commercial
mortgage-backed
|
6,555 | 59 | 150 | 11,643 | 56 | 96 | ||||||||||||||||||
Other (3)
|
13,280 | 67 | 141 | 17,768 | 93 | 54 | ||||||||||||||||||
Total (4)
|
$ | 82,999 | $ | 4,221 | $ | 297 | $ | 88,821 | $ | 4,105 | $ | 167 | ||||||||||||
(1) | Comprised of senior and subordinated interests in securitization-related entities purchased in connection with secondary market-making activities in which the firm also holds retained interests. In addition to these interests, the firm had other continuing involvement in the form of derivative transactions and guarantees with certain nonconsolidated VIEs for which the carrying value was a net liability of $78 million and $87 million as of September 2010 and December 2009, respectively. The notional amounts of these transactions are included in maximum exposure to loss in the nonconsolidated VIE table below. | |
(2) | Primarily consists of outstanding principal and retained interests related to government agency securitization entities. | |
(3) | Primarily consists of CDOs backed by corporate and mortgage obligations and CLOs. | |
(4) | Includes $7.32 billion of outstanding principal amount and $22 million of fair value of retained interests as of September 2010 related to securitization entities in which the firms only continuing involvement is retained servicing, which is market-based and therefore not a variable interest. |
As of September 2010 | As of December 2009 | |||||||||||||||
Type of Retained Interests | Type of Retained Interests | |||||||||||||||
Mortgage- |
Mortgage- |
|||||||||||||||
Backed | Other (1) | Backed | Other (1) | |||||||||||||
($ in millions) | ||||||||||||||||
Fair value of retained interests
|
$ | 4,154 | $ | 67 | $ | 4,012 | $ | 93 | ||||||||
Weighted average life (years)
|
5.9 | 4.0 | 4.4 | 4.4 | ||||||||||||
Constant prepayment
rate (2)
|
16.6 | % | N.M. | 23.5 | % | N.M. | ||||||||||
Impact of 10% adverse
change (2)
|
$ | (36 | ) | N.M. | $ | (44 | ) | N.M. | ||||||||
Impact of 20% adverse
change (2)
|
(73 | ) | N.M. | (92 | ) | N.M. | ||||||||||
Discount
rate (3)
|
6.3 | % | N.M. | 8.4 | % | N.M. | ||||||||||
Impact of 10% adverse change
|
$ | (81 | ) | N.M. | $ | (76 | ) | N.M. | ||||||||
Impact of 20% adverse change
|
(157 | ) | N.M. | (147 | ) | N.M. |
(1) | Due to the nature and current fair value of certain of these retained interests, the weighted average assumptions for constant prepayment and discount rates and the related sensitivity to adverse changes are not meaningful as of September 2010 and December 2009. The firms maximum exposure to adverse changes in the value of these interests is the firms carrying value of $67 million and $93 million as of September 2010 and December 2009, respectively. | |
(2) | Constant prepayment rate is included only for positions for which constant prepayment rate is a key assumption in the determination of fair value. | |
(3) | The majority of the firms mortgage-backed retained interests are U.S. government agency-issued collateralized mortgage obligations, for which there is no anticipated credit loss. For the remainder of the firms retained interests, the expected credit loss assumptions are reflected within the discount rate. |
As of September 2010 | ||||||||||||||||||||||||||||
Real estate, |
||||||||||||||||||||||||||||
Corporate |
credit-related |
Other |
||||||||||||||||||||||||||
Mortgage- |
CDOs and |
and other |
asset- |
Power- |
Investment |
|||||||||||||||||||||||
backed (1) | CLOs (1) | investing (2) | backed (1) | related (3) | funds (4) | Total | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Assets in VIE
|
$ | 77,532 | (6) | $ | 21,101 | $ | 13,661 | $ | 3,615 | $ | 563 | $ | 2,087 | $ | 118,559 | |||||||||||||
Carrying Value of the Firms Variable Interests | ||||||||||||||||||||||||||||
Assets
|
$ | 5,007 | $ | 839 | $ | 1,297 | $ | 123 | $ | 248 | $ | 5 | $ | 7,519 | ||||||||||||||
Liabilities
|
4 | 125 | 2 | 7 | 7 | | 145 | |||||||||||||||||||||
Maximum Exposure to Loss in Nonconsolidated VIEs (5) | ||||||||||||||||||||||||||||
Retained interests
|
$ | 4,132 | $ | 52 | $ | | $ | 15 | $ | | $ | | $ | 4,199 | ||||||||||||||
Purchased interests
|
615 | 273 | | 100 | | | 988 | |||||||||||||||||||||
Commitments and guarantees
|
| 2 | 180 | | 56 | | 238 | (9) | ||||||||||||||||||||
Derivatives
|
3,326 | (7) | 6,992 | (8) | | 1,122 | | | 11,440 | (9) | ||||||||||||||||||
Loans and investments
|
94 | | 1,297 | | 254 | 5 | 1,650 | |||||||||||||||||||||
Total
|
$ | 8,167 | (6) | $ | 7,319 | $ | 1,477 | $ | 1,237 | $ | 310 | $ | 5 | $ | 18,515 | |||||||||||||
As of December 2009 | ||||||||||||||||||||||||||||
Real estate, |
||||||||||||||||||||||||||||
Corporate |
credit-related |
Other |
Principal- |
|||||||||||||||||||||||||
Mortgage |
CDOs and |
and other |
asset- |
Power- |
protected |
|||||||||||||||||||||||
CDOs (1) | CLOs (1) | investing (2) | backed (1) | related (3) | notes (10) | Total | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Assets in VIE
|
$ | 9,114 | $ | 32,490 | $ | 22,618 | $ | 497 | $ | 592 | $ | 2,209 | $ | 67,520 | ||||||||||||||
Carrying Value of the Firms Variable Interests | ||||||||||||||||||||||||||||
Assets
|
$ | 182 | $ | 834 | $ | 2,386 | $ | 16 | $ | 224 | $ | 12 | $ | 3,654 | ||||||||||||||
Liabilities
|
10 | 400 | 204 | 12 | 3 | 1,357 | 1,986 | |||||||||||||||||||||
Maximum Exposure to Loss in Nonconsolidated VIEs (5) | ||||||||||||||||||||||||||||
Retained and purchased interests
|
$ | 135 | $ | 259 | $ | | $ | | $ | | $ | | $ | 394 | ||||||||||||||
Commitments and guarantees
|
| 3 | 397 | | 37 | | 437 | (9) | ||||||||||||||||||||
Derivatives
|
4,111 | (7) | 7,577 | (8) | | 497 | | 2,512 | 14,697 | (9) | ||||||||||||||||||
Loans and investments
|
| | 2,425 | | 224 | | 2,649 | |||||||||||||||||||||
Total
|
$ | 4,246 | $ | 7,839 | $ | 2,822 | $ | 497 | $ | 261 | $ | 2,512 | $ | 18,177 | ||||||||||||||
(1) | These VIEs are generally financed through the issuance of debt instruments collateralized by assets held by the VIE. Substantially all assets and liabilities held by the firm related to these VIEs are included in Trading assets, at fair value and Trading liabilities, at fair value, respectively, in the condensed consolidated statements of financial condition. | |
(2) | The firm obtains interests in these VIEs in connection with making investments in real estate, distressed loans and other types of debt, mezzanine instruments and equities. These VIEs are generally financed through the issuance of debt and equity instruments which are either collateralized by or indexed to assets held by the VIE. Assets and liabilities held by the firm related to these VIEs are primarily included in Trading assets, at fair value and Other assets, and Other liabilities and accrued expenses and Payables to customer and counterparties, respectively, in the condensed consolidated statements of financial condition. | |
(3) | These VIEs are financed through the issuance of debt instruments. Assets and liabilities held by the firm related to these VIEs are included in Other assets and Other liabilities and accrued expenses, respectively, in the condensed consolidated statements of financial condition. | |
(4) | These VIEs are generally financed through the issuance of equity instruments. Assets held by the firm related to these VIEs are included in Trading assets, at fair value in the condensed consolidated statement of financial condition. | |
(5) | Such amounts do not represent the anticipated losses in connection with these transactions because they exclude the effect of offsetting financial instruments that are held to mitigate these risks. | |
(6) | Assets in VIE and maximum exposure to loss include $7.62 billion and $3.44 billion, respectively, related to CDOs backed by mortgage obligations as of September 2010. | |
(7) | Primarily consists of written protection on investment-grade, short-term collateral held by VIEs that have issued CDOs. | |
(8) | Primarily consists of total return swaps on CDOs and CLOs. The firm has generally transferred the risks related to the underlying securities through derivatives with non-VIEs. | |
(9) | The aggregate amounts include $4.02 billion and $4.66 billion as of September 2010 and December 2009, respectively, related to guarantees and derivative transactions with VIEs to which the firm transferred assets. |
(10) | Consists of out-of-the-money written put options that provide principal protection to clients invested in various fund products, with risk to the firm mitigated through portfolio rebalancing. Assets related to these VIEs are included in Trading assets, at fair value and liabilities related to these VIEs are included in Other secured financings, Unsecured short-term borrowings, including the current portion of unsecured long-term borrowings or Unsecured long-term borrowings in the condensed consolidated statement of financial condition. Assets in VIE, carrying value of liabilities and maximum exposure to loss exclude $3.97 billion as of December 2009, associated with guarantees related to the firms performance under borrowings from the VIE, which are recorded as liabilities in the condensed consolidated statement of financial condition. Substantially all of the liabilities included in the table above relate to additional borrowings from the VIE associated with principal-protected notes guaranteed by the firm. These VIEs were consolidated by the firm upon adoption of ASU No. 2009-17. |