The Company is involved with various special purpose entities (“SPEs”) in the normal course of business. In most cases, these entities are deemed to be VIEs.

The Company applies accounting guidance for consolidation of VIEs to certain entities in which equity investors do not have the characteristics of a controlling financial interest. Excluding entities subject to the Deferral (as defined in Note 2 to the consolidated financial statements included in the Form 10-K), the primary beneficiary of a VIE is the party that both (1) has the power to direct the activities of a VIE that most significantly affect the VIE's economic performance and (2) has an obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. The Company consolidates entities of which it is the primary beneficiary.

The Company's variable interests in VIEs include debt and equity interests, commitments, guarantees, derivative instruments and certain fees. The Company's involvement with VIEs arises primarily from:

• Interests purchased in connection with market-making activities, securities held in its available for sale portfolio and retained interests held as a result of securitization activities, including re-securitization transactions.

• Guarantees issued and residual interests retained in connection with municipal bond securitizations.

• Loans made to and investments in VIEs that hold debt, equity, real estate or other assets.

• Structuring of credit-linked notes (“CLN”) or other asset-repackaged notes designed to meet the investment objectives of clients.

• Other structured transactions designed to provide tax-efficient yields to the Company or its clients.

The Company determines whether it is the primary beneficiary of a VIE upon its initial involvement with the VIE and reassesses whether it is the primary beneficiary on an ongoing basis as long as it has any continuing involvement with the VIE. This determination is based upon an analysis of the design of the VIE, including the VIE's structure and activities, the power to make significant economic decisions held by the Company and by other parties, and the variable interests owned by the Company and other parties.

The power to make the most significant economic decisions may take a number of different forms in different types of VIEs. The Company considers servicing or collateral management decisions as representing the power to make the most significant economic decisions in transactions such as securitizations or CDOs. As a result, the Company does not consolidate securitizations or CDOs for which it does not act as the servicer or collateral manager unless it holds certain other rights to replace the servicer or collateral manager or to require the liquidation of the entity. If the Company serves as servicer or collateral manager, or has certain other rights described in the previous sentence, the Company analyzes the interests in the VIE that it holds and consolidates only those VIEs for which it holds a potentially significant interest of the VIE.

The structure of securitization vehicles and CDOs are driven by several parties, including loan seller(s) in securitization transactions, the collateral manager in a CDO, one or more rating agencies, a financial guarantor in some transactions and the underwriter(s) of the transactions, who serve to reflect specific investor demand. In addition, subordinate investors, such as the “B-piece” buyer in commercial mortgage backed securitizations or equity investors in CDOs, can influence whether specific loans are excluded from a CMBS transaction or investment criteria in a CDO.

For many transactions, such as re-securitization transactions, CLNs and other asset-repackaged notes, there are no significant economic decisions made on an ongoing basis. In these cases, the Company focuses its analysis on decisions made prior to the initial closing of the transaction and at the termination of the transaction. Based upon factors, which include an analysis of the nature of the assets, including whether the assets were issued in a transaction sponsored by the Company and the extent of the information available to the Company and to investors, the number, nature and involvement of investors, other rights held by the Company and investors, the standardization of the legal documentation and the level of the continuing involvement by the Company, including the amount and type of interests owned by the Company and by other investors, the Company concluded in most of these transactions that decisions made prior to the initial closing were shared between the Company and the initial investors. The Company focused its control decision on any right held by the Company or investors related to the termination of the VIE. Most re-securitization transactions, CLNs and other asset-repackaged notes have no such termination rights.

Except for consolidated VIEs included in other structured financings and managed real estate partnerships in the tables below, the Company accounts for the assets held by the entities primarily in Financial instruments owned and the liabilities of the entities as Other secured financings in the condensed consolidated statements of financial condition. For consolidated VIEs included in other structured financings, the Company accounts for the assets held by the entities primarily in Premises, equipment and software costs, and Other assets in the condensed consolidated statements of financial condition. For consolidated VIEs included in managed real estate partnerships, the Company accounts for the assets held by the entities primarily in Financial instruments owned—Investments in the condensed consolidated statements of financial condition. Except for consolidated VIEs included in other structured financings, the assets and liabilities are measured at fair value, with changes in fair value reflected in earnings.

The assets owned by many consolidated VIEs cannot be removed unilaterally by the Company and are not generally available to the Company. The related liabilities issued by many consolidated VIEs are non-recourse to the Company. In certain other consolidated VIEs, the Company has the unilateral right to remove assets or provides additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.

The following tables present information at June 30, 2012 and December 31, 2011 about VIEs that the Company consolidates. Consolidated VIE assets and liabilities are presented after intercompany eliminations and include assets financed on a non-recourse basis.

		At June 30, 2012
		Mortgage and Asset-backed Securitizations		Collateralized Debt Obligations		Managed Real Estate Partnerships		Other Structured Financings		Other

		(dollars in millions)
VIE assets	$	1,594	$	237	$	2,255	$	833	$	2,366
VIE liabilities	$	967	$	87	$	81	$	2,571	$	304

		At December 31, 2011
		Mortgage and Asset-Backed Securitizations		Collateralized Debt Obligations		Managed Real Estate Partnerships		Other Structured Financings		Other

		(dollars in millions)
VIE assets	$	2,414	$	102	$	2,207	$	918	$	1,937
VIE liabilities	$	1,699	$	69	$	102	$	2,576	$	556

In general, the Company's exposure to loss in consolidated VIEs is limited to losses that would be absorbed on the VIE's assets recognized in its financial statements, net of losses absorbed by third-party holders of the VIE's liabilities. At June 30, 2012 and December 31, 2011, managed real estate partnerships reflected noncontrolling interests in the Company's condensed consolidated financial statements of $1,734 million and $1,653 million, respectively. The Company also had additional maximum exposure to losses of approximately $120 million and $200 million at June 30, 2012 and December 31, 2011, respectively. This additional exposure related primarily to certain derivatives (e.g., instead of purchasing senior securities, the Company has sold credit protection to synthetic CDOs through credit derivatives that are typically related to the most senior tranche of the CDO) and commitments, guarantees and other forms of involvement.

The following tables present information about certain non-consolidated VIEs in which the Company had variable interests at June 30, 2012 and December 31, 2011. The tables include all VIEs in which the Company has determined that its maximum exposure to loss is greater than specific thresholds or meets certain other criteria. Most of the VIEs included in the tables below are sponsored by unrelated parties; the Company's involvement generally is the result of the Company's secondary market-making activities and securities held in its available for sale portfolio (see Note 4).

			At June 30, 2012
			Mortgage and Asset-Backed Securitizations			Collateralized Debt Obligations		Municipal Tender Option Bonds		Other Structured Financings		Other

			(dollars in millions)
VIE assets that the Company does not consolidate
	(unpaid principal balance)(1)		$	210,595	$	20,491	$	6,386	$	1,865	$	17,287
Maximum exposure to loss:
	Debt and equity interests(2)		$	17,797	$	1,118	$	359	$	896	$	2,512
	Derivative and other contracts			108		47		3,705		—		863
	Commitments, guarantees and other			315		—		—		777		1,007
		Total maximum exposure to loss	$	18,220	$	1,165	$	4,064	$	1,673	$	4,382

Carrying value of exposure to loss—Assets:
	Debt and equity interests(2)		$	17,797	$	1,118	$	359	$	538	$	2,507
	Derivative and other contracts			109		2		6		—		308
		Total carrying value of exposure to loss—Assets	$	17,906	$	1,120	$	365	$	538	$	2,815

Carrying value of exposure to loss—Liabilities:
	Derivative and other contracts		$	12	$	2	$	—	$	—	$	122
	Commitments, guarantees and other			—		—		—		12		159
		Total carrying value of exposure to loss—Liabilities	$	12	$	2	$	—	$	12	$	281

(1) Mortgage and asset-backed securitizations include VIE assets as follows: $10.5 billion of residential mortgages; $58.6 billion of commercial mortgages; $103.7 billion of U.S. agency collateralized mortgage obligations; and $37.8 billion of other consumer or commercial loans.

(2) Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.6 billion of residential mortgages; $0.6 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $3.1 billion of other consumer or commercial loans.

			At December 31, 2011
			Mortgage and Asset-Backed Securitizations			Collateralized Debt Obligations		Municipal Tender Option Bonds		Other Structured Financings		Other

			(dollars in millions)
VIE assets that the Company does not consolidate
	(unpaid principal balance)(1)		$	231,110	$	7,593	$	6,833	$	1,944	$	20,997
Maximum exposure to loss:
	Debt and equity interests(2)		$	16,469	$	491	$	201	$	978	$	2,413
	Derivative and other contracts			103		843		4,141		—		1,209
	Commitments, guarantees and other			208		—		—		804		561
		Total maximum exposure to loss	$	16,780	$	1,334	$	4,342	$	1,782	$	4,183

Carrying value of exposure to loss—Assets:
	Debt and equity interests(2)		$	16,469	$	491	$	201	$	640	$	2,413
	Derivative and other contracts			101		657		24		—		338
		Total carrying value of exposure to loss—Assets	$	16,570	$	1,148	$	225	$	640	$	2,751

Carrying value of exposure to loss—Liabilities:
	Derivative and other contracts		$	13	$	159	$	—	$	—	$	114
	Commitments, guarantees and other			—		—		—		14		176
		Total carrying value of exposure to loss—Liabilities	$	13	$	159	$	—	$	14	$	290

(1) Mortgage and asset-backed securitizations include VIE assets as follows: $9.1 billion of residential mortgages; $81.7 billion of commercial mortgages; $121.6 billion of U.S. agency collateralized mortgage obligations; and $18.7 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period's presentation.

(2) Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $0.6 billion of residential mortgages; $1.1 billion of commercial mortgages; $13.5 billion of U.S. agency collateralized mortgage obligations; and $1.3 billion of other consumer or commercial loans. Prior period amounts were adjusted to conform to the current period's presentation.

The Company's maximum exposure to loss often differs from the carrying value of the VIE's assets. The maximum exposure to loss is dependent on the nature of the Company's variable interest in the VIEs and is limited to the notional amounts of certain liquidity facilities, other credit support, total return swaps, written put options, and the fair value of certain other derivatives and investments the Company has made in the VIEs. Liabilities issued by VIEs generally are non-recourse to the Company. Where notional amounts are utilized in quantifying maximum exposure related to derivatives, such amounts do not reflect fair value writedowns already recorded by the Company.

The Company's maximum exposure to loss does not include the offsetting benefit of any financial instruments that the Company may utilize to hedge these risks associated with the Company's variable interests. In addition, the Company's maximum exposure to loss is not reduced by the amount of collateral held as part of a transaction with the VIE or any party to the VIE directly against a specific exposure to loss.

Securitization transactions generally involve VIEs. Primarily as a result of its secondary market-making activities, the Company owned additional securities issued by securitization SPEs for which the maximum exposure to loss is less than specific thresholds. These additional securities totaled $3.8 billion at June 30, 2012. These securities were either retained in connection with transfers of assets by the Company, acquired in connection with secondary market-making activities or held in the Company's available for sale portfolio. Securities issued by securitization SPEs consist of $0.9 billion of securities backed primarily by residential mortgage loans, $0.9 billion of securities backed by U.S. agency collateralized mortgage obligations, $0.7 billion of securities backed by commercial mortgage loans, $0.5 billion of securities backed by collateralized debt obligations or collateralized loan obligations and $0.8 billion backed by other consumer loans, such as credit card receivables, automobile loans and student loans. The Company's primary risk exposure is to the securities issued by the SPE owned by the Company, with the risk highest on the most subordinate class of beneficial interests. These securities generally are included in Financial instruments owned—Corporate and other debt or Securities available for sale and are measured at fair value. The Company does not provide additional support in these transactions through contractual facilities, such as liquidity facilities, guarantees or similar derivatives. The Company's maximum exposure to loss generally equals the fair value of the securities owned. Included in the amounts above are certain securitization securities held in the Company's available for sale portfolio (see Note 4).

The Company's transactions with VIEs primarily include securitizations, municipal tender option bond trusts, credit protection purchased through CLNs, other structured financings, collateralized loan and debt obligations, equity-linked notes, managed real estate partnerships and asset management investment funds. The Company's continuing involvement in VIEs that it does not consolidate can include ownership of retained interests in Company-sponsored transactions, interests purchased in the secondary market (both for Company-sponsored transactions and transactions sponsored by third parties), derivatives with securitization SPEs (primarily interest rate derivatives in commercial mortgage and residential mortgage securitizations and credit derivatives in which the Company has purchased protection in synthetic CDOs), and as servicer in residential mortgage securitizations in the U.S. and Europe and commercial mortgage securitizations in Europe. Such activities are further described in Note 7 to the consolidated financial statements for the year ended December 31, 2011 included in the Form 10-K.

The following tables present information at June 30, 2012 regarding transactions with SPEs in which the Company, acting as principal, transferred financial assets with continuing involvement and received sales treatment.

				At June 30, 2012
				Residential Mortgage Loans		Commercial Mortgage Loans		U.S. Agency Collateralized Mortgage Obligations		Credit-Linked Notes and Other



				(dollars in millions)
SPE assets (unpaid principal balance)(1)			$	39,902	$	70,531	$	12,993	$	13,195
Retained interests (fair value):
	Investment grade		$	—	$	—	$	1,442	$	—
	Non-investment grade			93		62		—		1,458
		Total retained interests (fair value)	$	93	$	62	$	1,442	$	1,458
Interests purchased in the secondary market (fair value):
	Investment grade		$	—	$	—	$	31	$	32
	Non-investment grade			112		206		—		355
		Total interests purchased in the secondary market (fair value)	$	112	$	206	$	31	$	387
Derivative assets (fair value)			$	9	$	970	$	—	$	165
Derivative liabilities (fair value)			$	24	$	1	$	—	$	395

				At June 30, 2012
				Level 1		Level 2		Level 3		Total

				(dollars in millions)
Retained interests (fair value):
	Investment grade		$	—	$	1,442	$	—	$	1,442
	Non-investment grade			—		138		1,475		1,613
		Total retained interests (fair value)	$	—	$	1,580	$	1,475	$	3,055
Interests purchased in the secondary market (fair value):
	Investment grade		$	—	$	63	$	—	$	63
	Non-investment grade			—		654		19		673
		Total interests purchased in the secondary market (fair value)	$	—	$	717	$	19	$	736
Derivative assets (fair value)			$	—	$	656	$	488	$	1,144
Derivative liabilities (fair value)			$	—	$	395	$	25	$	420

The following tables present information at December 31, 2011 regarding transactions with SPEs in which the Company, acting as principal, transferred assets with continuing involvement and received sales treatment.

				At December 31, 2011
				Residential Mortgage Loans		Commercial Mortgage Loans		U.S. Agency Collateralized Mortgage Obligations		Credit-Linked Notes and Other



				(dollars in millions)
SPE assets (unpaid principal balance)(1)			$	41,977	$	85,333	$	33,728	$	14,315
Retained interests (fair value):
	Investment grade		$	14	$	22	$	1,151	$	2
	Non-investment grade			106		44		—		1,545
		Total retained interests (fair value)	$	120	$	66	$	1,151	$	1,547
Interests purchased in the secondary market (fair value):
	Investment grade		$	45	$	164	$	20	$	411
	Non-investment grade			149		82		—		11
		Total interests purchased in the secondary market (fair value)	$	194	$	246	$	20	$	422
Derivative assets (fair value)			$	18	$	1,200	$	—	$	223
Derivative liabilities (fair value)			$	30	$	31	$	—	$	510

				At December 31, 2011
				Level 1		Level 2		Level 3		Total

				(dollars in millions)
Retained interests (fair value):
	Investment grade		$	—	$	1,186	$	3	$	1,189
	Non-investment grade			—		74		1,621		1,695
		Total retained interests (fair value)	$	—	$	1,260	$	1,624	$	2,884
Interests purchased in the secondary market (fair value):
	Investment grade		$	—	$	638	$	2	$	640
	Non-investment grade			—		126		116		242
		Total interests purchased in the secondary market (fair value)	$	—	$	764	$	118	$	882
Derivative assets (fair value)			$	—	$	869	$	572	$	1,441
Derivative liabilities (fair value)			$	—	$	541	$	30	$	571

Transferred assets are carried at fair value prior to securitization, and any changes in fair value are recognized in the condensed consolidated statements of income. The Company may act as underwriter of the beneficial interests issued by securitization vehicles. Investment banking underwriting net revenues are recognized in connection with these transactions. The Company may retain interests in the securitized financial assets as one or more tranches of the securitization. These retained interests are included in the condensed consolidated statements of financial condition at fair value. Any changes in the fair value of such retained interests are recognized in the condensed consolidated statements of income.

Net gains on sales of assets in securitization transactions at the time of the sale were not material in the six months ended June 30, 2012 and 2011.

During the six months ended June 30, 2012 and 2011, the Company received proceeds from new securitization transactions of $9.2 billion and $15.0 billion, respectively. During the six months ended June 30, 2012 and 2011, the Company received proceeds from cash flows from retained interests in securitization transactions of $1.7 billion and $3.9 billion, respectively.

The Company has provided, or otherwise agreed to be responsible for, representations and warranties regarding certain assets transferred in securitization transactions sponsored by the Company (see Note 11).

In order to be treated as a sale of assets for accounting purposes, a transaction must meet all of the criteria stipulated in the accounting guidance for the transfer of financial assets. If the transfer fails to meet these criteria, that transfer of financial assets is treated as a failed sale. In such case, the Company continues to recognize the assets in Financial instruments owned, and the Company recognizes the associated liabilities in Other secured financings in the condensed consolidated statements of financial condition.

The assets transferred to many unconsolidated VIEs in transactions accounted for as failed sales cannot be removed unilaterally by the Company and are not generally available to the Company. The related liabilities issued by many unconsolidated VIEs are non-recourse to the Company. In certain other failed sale transactions, the Company has the unilateral right to remove assets or provide additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.

The following table presents information about the carrying value (equal to fair value) of assets and liabilities resulting from transfers of financial assets treated by the Company as secured financings:

		At June 30, 2012				At December 31, 2011
		Carrying Value of				Carrying Value of
		Assets		Liabilities		Assets		Liabilities

		(dollars in millions)
Commercial mortgage loans	$	—	$	—	$	121	$	121
Credit-linked notes		337		269		383		339
Equity-linked transactions		376		344		1,243		1,214
Other		97		97		75		74

		At June 30, 2012
		Residential Mortgage Unconsolidated SPEs			Residential Mortgage Consolidated SPEs		Commercial Mortgage Unconsolidated SPEs		Commercial Mortgage Consolidated SPEs

			(dollars in millions)
Assets serviced (unpaid principal balance)		$	805	$	1,187	$	5,923	$	878
Amounts past due 90 days or greater
	(unpaid principal balance)(1)	$	85	$	34	$	—	$	—
Percentage of amounts past due 90 days
	or greater(1)		10.6%		2.9%		—		—
Credit losses		$	—	$	5	$	—	$	—

(1) Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in foreclosure and real estate owned.

		At December 31, 2011
		Residential Mortgage Unconsolidated SPEs			Residential Mortgage Consolidated SPEs		Commercial Mortgage Unconsolidated SPEs		Commercial Mortgage Consolidated SPEs

			(dollars in millions)
Assets serviced (unpaid principal balance)		$	9,821	$	2,180	$	5,750	$	1,596
Amounts past due 90 days or greater
	(unpaid principal balance)(1)	$	3,087	$	354	$	—	$	—
Percentage of amounts past due 90 days
	or greater(1)		31.4%		16.2%		—		—
Credit losses		$	631	$	81	$	—	$	—

(1) Amounts include loans that are at least 90 days contractually delinquent, loans for which the borrower has filed for bankruptcy, loans in foreclosure and real estate owned.