v2.4.0.6
Fair Value Disclosures (Tables)
 12 Months Ended
Dec. 31, 2012
Fair Value Disclosures  
Assets and Liabilities Measured at Fair Value on a Recurring Basis
    Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Counterparty and Cash Collateral Netting Balance at December 31, 2012
     
     
              
     (dollars in millions)
Assets at Fair Value          
Financial instruments owned:          
 U.S. government and agency securities:          
  U.S. Treasury securities $ 24,662$ 14$ —$ —$ 24,676
  U.S. agency securities   1,451  27,888  —  —  29,339
   Total U.S. government and agency securities  26,113  27,902  —  —  54,015
 Other sovereign government obligations   37,669  5,487  6  —  43,162
 Corporate and other debt:          
  State and municipal securities   —  1,558  —  —  1,558
  Residential mortgage-backed securities   —  1,439  45  —  1,484
  Commercial mortgage-backed securities   —  1,347  232  —  1,579
  Asset-backed securities   —  915  109  —  1,024
  Corporate bonds   —  18,403  660  —  19,063
  Collateralized debt obligations   —  685  1,951  —  2,636
  Loans and lending commitments  —  12,617  4,694  —  17,311
  Other debt   —  4,457  45  —  4,502
   Total corporate and other debt   —  41,421  7,736  —  49,157
 Corporate equities(1)   68,072  1,067  288  —  69,427
 Derivative and other contracts:          
  Interest rate contracts  446  819,581  3,774  —  823,801
  Credit contracts  —  63,234  5,033  —  68,267
  Foreign exchange contracts  34  52,729  31  —  52,794
  Equity contracts  760  37,074  766  —  38,600
  Commodity contracts  4,082  14,256  2,308  —  20,646
  Other  —  143  —  —  143
  Netting(2)  (4,740)  (883,733)  (6,947)  (72,634)  (968,054)
   Total derivative and other contracts  582  103,284  4,965  (72,634)  36,197
 Investments:          
  Private equity funds  —  —  2,179  —  2,179
  Real estate funds  —  6  1,370  —  1,376
  Hedge funds  —  382  552  —  934
  Principal investments  185  83  2,833  —  3,101
  Other  199  71  486  —  756
   Total investments  384  542  7,420  —  8,346
 Physical commodities   —  7,299  —  —  7,299
  Total financial instruments owned   132,820  187,002  20,415  (72,634)  267,603
Securities available for sale  14,466  25,403  —  —  39,869
Securities received as collateral  14,232  46  —  —  14,278
Federal funds sold and securities purchased           
 under agreements to resell  —  621  —  —  621
Intangible assets(3)  —  —  7  —  7
Total assets measured at fair value$ 161,518$ 213,072$ 20,422$ (72,634)$ 322,378
              
Liabilities at Fair Value          
Deposits $ —$ 1,485$ —$ —$ 1,485
Commercial paper and other short-term borrowings   —  706  19  —  725
Financial instruments sold, not yet purchased:          
 U.S. government and agency securities:          
  U.S. Treasury securities   20,098  21  —  —  20,119
  U.S. agency securities   1,394  107  —  —  1,501
   Total U.S. government and agency securities  21,492  128  —  —  21,620
 Other sovereign government obligations   27,583  2,031  —  —  29,614
 Corporate and other debt:          
  State and municipal securities   —  47  —  —  47
  Residential mortgage-backed securities  —  —  4  —  4
  Corporate bonds   —  3,942  177  —  4,119
  Collateralized debt obligations  —  328  —  —  328
  Unfunded lending commitments   —  305  46  —  351
  Other debt   —  156  49  —  205
   Total corporate and other debt   —  4,778  276  —  5,054
 Corporate equities(1)   25,216  1,655  5  —  26,876
 Derivative and other contracts:          
  Interest rate contracts  533  789,715  3,856  —  794,104
  Credit contracts  —  61,283  3,211  —  64,494
  Foreign exchange contracts  2  56,021  390  —  56,413
  Equity contracts  748  39,212  1,910  —  41,870
  Commodity contracts  4,530  15,702  1,599  —  21,831
  Other  —  54  7  —  61
  Netting(2)  (4,740)  (883,733)  (6,947)  (46,395)  (941,815)
   Total derivative and other contracts  1,073  78,254  4,026  (46,395)  36,958
  Total financial instruments sold, not yet purchased   75,364  86,846  4,307  (46,395)  120,122
Obligation to return securities received as collateral   18,179  47  —  —  18,226
Securities sold under agreements to repurchase  —  212  151  —  363
Other secured financings   —  9,060  406  —  9,466
Long-term borrowings   —  41,255  2,789  —  44,044
Total liabilities measured at fair value$ 93,543$ 139,611$ 7,672$ (46,395)$ 194,431

_____________

(1)       The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

(2)       For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that level. For further information on derivative instruments and hedging activities, see Note 12.

(3) Amount represents mortgage servicing rights (“MSR”) accounted for at fair value. See Note 7 for further information on MSRs.

 

    Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Counterparty and Cash Collateral Netting Balance at December 31, 2011
      
      
      
              
     (dollars in millions)
Assets at Fair Value          
Financial instruments owned:          
 U.S. government and agency securities:          
  U.S. Treasury securities $ 38,769$ 1$ —$ —$ 38,770
  U.S. agency securities   4,332  20,339  8  —  24,679
   Total U.S. government and agency securities  43,101  20,340  8  —  63,449
 Other sovereign government obligations   22,650  6,290  119  —  29,059
 Corporate and other debt:          
  State and municipal securities   —  2,261  —  —  2,261
  Residential mortgage-backed securities   —  1,304  494  —  1,798
  Commercial mortgage-backed securities   —  1,686  134  —  1,820
  Asset-backed securities   —  937  31  —  968
  Corporate bonds   —  25,873  675  —  26,548
  Collateralized debt obligations   —  1,711  980  —  2,691
  Loans and lending commitments  —  14,854  9,590  —  24,444
  Other debt   —  8,265  128  —  8,393
   Total corporate and other debt   —  56,891  12,032  —  68,923
 Corporate equities(1)   45,173  2,376  417  —  47,966
 Derivative and other contracts:          
  Interest rate contracts  1,493  906,082  5,301  —  912,876
  Credit contracts  —  123,689  15,102  —  138,791
  Foreign exchange contracts  —  61,770  573  —  62,343
  Equity contracts  929  44,558  800  —  46,287
  Commodity contracts  6,356  31,246  2,176  —  39,778
  Other  —  292  306  —  598
  Netting(2)  (7,596)  (1,045,912)  (11,837)  (87,264)  (1,152,609)
   Total derivative and other contracts  1,182  121,725  12,421  (87,264)  48,064
 Investments:          
  Private equity funds  —  7  1,936  —  1,943
  Real estate funds  —  5  1,213  —  1,218
  Hedge funds  —  473  696  —  1,169
  Principal investments  161  104  2,937  —  3,202
  Other  141  21  501  —  663
   Total investments  302  610  7,283  —  8,195
 Physical commodities   —  9,651  46  —  9,697
  Total financial instruments owned   112,408  217,883  32,326  (87,264)  275,353
Securities available for sale  13,437  17,058  —  —  30,495
Securities received as collateral   11,530  121  —  —  11,651
Federal funds sold and securities purchased under          
 agreements to resell  —  112  —  —  112
Intangible assets(3)   —  —  133  —  133
Total assets measured at fair value$ 137,375$ 235,174$ 32,459$ (87,264)$ 317,744
              
Liabilities at Fair Value          
Deposits $ —$ 2,101$ —$ —$ 2,101
Commercial paper and other short-term borrowings   —  1,337  2  —  1,339
Financial instruments sold, not yet purchased:          
 U.S. government and agency securities:          
  U.S. Treasury securities   17,776  —  —  —  17,776
  U.S. agency securities   1,748  106  —  —  1,854
   Total U.S. government and agency securities  19,524  106  —  —  19,630
 Other sovereign government obligations   14,981  2,152  8  —  17,141
 Corporate and other debt:          
  State and municipal securities   —  3  —  —  3
  Residential mortgage-backed securities  —  —  355  —  355
  Commercial mortgage-backed securities   —  14  —  —  14
  Corporate bonds   —  6,217  219  —  6,436
  Collateralized debt obligations  —  3  —  —  3
  Unfunded lending commitments   —  1,284  85  —  1,369
  Other debt   —  157  73  —  230
   Total corporate and other debt   —  7,678  732  —  8,410
 Corporate equities(1)   24,347  149  1  —  24,497
 Derivative and other contracts:          
  Interest rate contracts  1,680  873,466  4,881  —  880,027
  Credit contracts  —  121,438  9,288  —  130,726
  Foreign exchange contracts  —  64,218  530  —  64,748
  Equity contracts  877  45,375  2,034  —  48,286
  Commodity contracts  7,144  31,248  1,606  —  39,998
  Other  —  879  1,396  —  2,275
  Netting(2)  (7,596)  (1,045,912)  (11,837)  (54,262)  (1,119,607)
   Total derivative and other contracts  2,105  90,712  7,898  (54,262)  46,453
 Physical commodities   —  16  —  —  16
  Total financial instruments sold, not yet purchased   60,957  100,813  8,639  (54,262)  116,147
Obligation to return securities received as collateral   15,267  127  —  —  15,394
Securities sold under agreements to repurchase  —  8  340  —  348
Other secured financings   —  14,024  570  —  14,594
Long-term borrowings   10  38,050  1,603  —  39,663
Total liabilities measured at fair value$ 76,234$ 156,460$ 11,154$ (54,262)$ 189,586

_____________

(1)       The Company holds or sells short for trading purposes equity securities issued by entities in diverse industries and of varying size.

(2)       For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that level. For further information on derivative instruments and hedging activities, see Note 12.

(3)       Amount represents MSRs accounted for at fair value. See Note 7 for further information on MSRs.

 
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
     Beginning Balance at December 31, 2011 Total Realized and Unrealized Gains (Losses) (1) Purchases Sales Issuances Settlements Net Transfers Ending Balance at December 31, 2012 Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at December 31, 2012(2)
                      
     (dollars in millions)
Assets at Fair Value                  
Financial instruments owned:                  
 U.S. agency securities $ 8$ —$ —$ (7)$ —$ —$ (1)$ —$ —
 Other sovereign government obligations   119  —  12  (125)  —  —  —  6  (9)
 Corporate and other debt:                  
  Residential mortgage-backed securities   494  (9)  32  (285)  —  —  (187)  45  (26)
  Commercial mortgage-backed securities   134  32  218  (49)  —  (100)  (3)  232  28
  Asset-backed securities   31  1  109  (32)  —  —  —  109  (1)
  Corporate bonds   675  22  447  (450)  —  —  (34)  660  (7)
  Collateralized debt obligations   980  216  1,178  (384)  —  —  (39)  1,951  142
  Loans and lending commitments  9,590  37  2,648  (2,095)  —  (4,316)  (1,170)  4,694  (91)
  Other debt   128  2  —  (95)  —  —  10  45  (6)
   Total corporate and other debt   12,032  301  4,632  (3,390)  —  (4,416)  (1,423)  7,736  39
 Corporate equities   417  (59)  134  (172)  —  —  (32)  288  (83)
 Net derivative and other contracts(3):                  
  Interest rate contracts   420  (275)  28  —  (7)  (217)  (31)  (82)  297
  Credit contracts   5,814  (2,799)  112  —  (502)  (961)  158  1,822  (3,216)
  Foreign exchange contracts   43  (279)  —  —  —  19  (142)  (359)  (225)
  Equity contracts   (1,234)  390  202  (9)  (112)  (210)  (171)  (1,144)  241
  Commodity contracts   570  114  16  —  (41)  (20)  70  709  222
  Other   (1,090)  57  —  —  —  236  790  (7)  53
   Total net derivative and                  
    other contracts  4,523  (2,792)  358  (9)  (662)  (1,153)  674  939  (2,628)
 Investments:                  
  Private equity funds  1,936  228  308  (294)  —  —  1  2,179  147
  Real estate funds  1,213  149  143  (136)  —  —  1  1,370  229
  Hedge funds  696  61  81  (151)  —  —  (135)  552  51
  Principal investments  2,937  130  160  (419)  —  —  25  2,833  93
  Other  501  (45)  158  (70)  —  —  (58)  486  (48)
   Total investments   7,283  523  850  (1,070)  —  —  (166)  7,420  472
 Physical commodities  46  —  —  —  —  (46)  —  —  —
Intangible assets   133  (39)  —  (83)  —  (4)  —  7  (7)
                      
Liabilities at Fair Value                  
Commercial paper and other                  
 short-term borrowings $ 2$ (5)$ —$ —$ 3$ (3)$ 12$ 19$ (4)
Financial instruments sold, not yet purchased:                  
 Other sovereign government obligations   8  —  (8)  —  —  —  —  —  —
 Corporate and other debt:                  
  Residential mortgage-backed securities   355  (4)  (355)  —  —  —  —  4  (4)
  Corporate bonds   219  (15)  (129)  110  —  —  (38)  177  (23)
  Unfunded lending commitments   85  39  —  —  —  —  —  46  39
  Other debt   73  9  (1)  36  —  (55)  5  49  11
   Total corporate and other debt   732  29  (485)  146  —  (55)  (33)  276  23
 Corporate equities   1  (1)  (21)  22  —  —  2  5  (3)
Securities sold under agreements to repurchase  340  (14)  —  —  —  —  (203)  151  (14)
Other secured financings   570  (69)  —  —  21  (232)  (22)  406  (67)
Long-term borrowings   1,603  (651)  —  —  1,050  (279)  (236)  2,789  (652)

___________

(1)       Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the consolidated statements of income except for $523 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

(2)       Amounts represent unrealized gains (losses) for 2012 related to assets and liabilities still outstanding at December 31, 2012.

(3)       Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 12.

 

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2011.

     Beginning Balance at December 31, 2010 Total Realized and Unrealized Gains (Losses) (1) Purchases Sales Issuances Settlements Net Transfers Ending Balance at December 31, 2011 Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at December 31, 2011(2)
                      
     (dollars in millions)
Assets at Fair Value                  
Financial instruments owned:                  
 U.S. agency securities $ 13$ —$ 66$ (68)$ —$ —$ (3)$ 8$ —
 Other sovereign government obligations   73  (4)  56  (2)  —  —  (4)  119  (2)
 Corporate and other debt:                  
  State and municipal securities   110  (1)  —  (96)  —  —  (13)  —  —
  Residential mortgage-backed securities   319  (61)  382  (221)  —  (1)  76  494  (59)
  Commercial mortgage-backed securities   188  12  75  (90)  —  —  (51)  134  (18)
  Asset-backed securities   13  4  13  (19)  —  —  20  31  2
  Corporate bonds   1,368  (136)  467  (661)  —  —  (363)  675  (20)
  Collateralized debt obligations   1,659  109  613  (1,296)  —  (55)  (50)  980  (84)
  Loans and lending commitments  11,666  (251)  2,932  (1,241)  —  (2,900)  (616)  9,590  (431)
  Other debt   193  42  14  (76)  —  (11)  (34)  128  —
   Total corporate and other debt   15,516  (282)  4,496  (3,700)  —  (2,967)  (1,031)  12,032  (610)
 Corporate equities   484  (46)  416  (360)  —  —  (77)  417  16
 Net derivative and other contracts(3):                  
  Interest rate contracts   424  628  45  —  (714)  (150)  187  420  522
  Credit contracts   6,594  319  1,199  —  (277)  (2,165)  144  5,814  1,818
  Foreign exchange contracts   46  (35)  2  —  —  28  2  43  (13)
  Equity contracts   (762)  592  214  (133)  (1,329)  136  48  (1,234)  564
  Commodity contracts   188  708  52  —  —  (433)  55  570  689
  Other   (913)  (552)  1  —  (118)  405  87  (1,090)  (536)
   Total net derivative and other contracts  5,577  1,660  1,513  (133)  (2,438)  (2,179)  523  4,523  3,044
 Investments:                  
  Private equity funds  1,986  159  245  (513)  —  —  59  1,936  85
  Real estate funds  1,176  21  196  (171)  —  —  (9)  1,213  251
  Hedge funds  901  (20)  169  (380)  —  —  26  696  (31)
  Principal investments  3,131  288  368  (819)  —  —  (31)  2,937  87
  Other  560  38  8  (34)  —  —  (71)  501  23
   Total investments  7,754  486  986  (1,917)  —  —  (26)  7,283  415
 Physical commodities  —  (47)  771  —  —  (673)  (5)  46  1
Securities received as collateral   1  —  —  (1)  —  —  —  —  —
Intangible assets   157  (25)  6  (1)  —  (4)  —  133  (27)
Liabilities at Fair Value                  
Deposits$ 16$ 2$ —$ —$ —$ (14)$ —$ —$ —
Commercial paper and other short-term borrowings   2  —  —  —  —  —  —  2  —
Financial instruments sold, not yet purchased:                  
 Other sovereign government obligations   —  1  —  9  —  —  —  8  —
 Corporate and other debt:                  
  Residential mortgage-backed securities   —  (8)  —  347  —  —  —  355  (8)
  Corporate bonds   44  37  (407)  694  —  —  (75)  219  51
  Unfunded lending commitments   263  178  —  —  —  —  —  85  178
  Other debt   194  123  (12)  22  —  (2)  (6)  73  12
  Total corporate and other debt   501  330  (419)  1,063  —  (2)  (81)  732  233
 Corporate equities   15  (1)  (15)  5  —  —  (5)  1  —
Obligation to return securities received as collateral   1  —  (1)  —  —  —  —  —  —
Securities sold under agreements to repurchase  351  11  —  —  —  —  —  340  11
Other secured financings   1,016  27  —  —  154  (267)  (306)  570  13
Long-term borrowings   1,316  39  —  —  769  (377)  (66)  1,603  32

____________

(1)       Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the consolidated statements of income except for $486 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

(2)       Amounts represent unrealized gains (losses) for 2011 related to assets and liabilities still outstanding at December 31, 2011.

(3)       Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 12.

 

     Beginning Balance at December 31, 2009 Total Realized and Unrealized Gains (Losses)(1) Purchases, Sales, Other Settlements and Issuances, net Net Transfers Ending Balance at December 31, 2010 Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at December 31, 2010(2)
                
     (dollars in millions)
Assets at Fair Value            
Financial instruments owned:            
 U.S. agency securities $ 36$ (1)$ 13$ (35)$ 13$ (1)
 Other sovereign government obligations   3  5  66  (1)  73  5
 Corporate and other debt:            
  State and municipal securities   713  (11)  (533)  (59)  110  (12)
  Residential mortgage-backed securities   818  12  (607)  96  319  (2)
  Commercial mortgage-backed securities   1,573  35  (1,054)  (366)  188  (61)
  Asset-backed securities   591  10  (436)  (152)  13  7
  Corporate bonds   1,038  (84)  403  11  1,368  41
  Collateralized debt obligations   1,553  368  (259)  (3)  1,659  189
  Loans and lending commitments  12,506  203  (376)  (667)  11,666  214
  Other debt   1,662  44  (92)  (1,421)  193  49
   Total corporate and other debt   20,454  577  (2,954)  (2,561)  15,516  425
 Corporate equities   536  118  (189)  19  484  59
 Net derivative and other contracts(3):            
  Interest rate contracts   387  238  (178)  (23)  424  260
  Credit contracts   8,824  (1,179)  128  (1,179)  6,594  58
  Foreign exchange contracts   254  (77)  33  (164)  46  (109)
  Equity contracts   (689)  (131)  (146)  204  (762)  (143)
  Commodity contracts   7  121  60  —  188  268
  Other   (437)  (266)  (220)  10  (913)  (284)
   Total net derivative and other contracts  8,346  (1,294)  (323)  (1,152)  5,577  50
 Investments:            
  Private equity funds  1,296  496  202  (8)  1,986  462
  Real estate funds  833  251  89  3  1,176  399
  Hedge funds  1,708  (161)  (327)  (319)  901  (160)
  Principal investments  3,195  470  229  (763)  3,131  412
  Other  581  109  (129)  (1)  560  49
   Total investments  7,613  1,165  64  (1,088)  7,754  1,162
Securities received as collateral   23  —  (22)  —  1  —
Intangible assets   137  43  (23)  —  157  23
Liabilities at Fair Value            
Deposits$ 24$ —$ —$ (8)$ 16$ —
Commercial paper and other short-term borrowings   —  —  2  —  2  —
Financial instruments sold, not yet purchased:            
 Corporate and other debt:            
  Asset-backed securities   4  —  (4)  —  —  —
  Corporate bonds   29  (15)  13  (13)  44  (9)
  Collateralized debt obligations   3  —  (3)  —  —  —
  Unfunded lending commitments   252  (4)  7  —  263  (2)
  Other debt   431  65  (161)  (11)  194  62
  Total corporate and other debt   719  46  (148)  (24)  501  51
 Corporate equities   4  17  54  (26)  15  9
Obligation to return securities received as collateral   23  —  (22)  —  1  —
Securities sold under agreements to repurchase  —  (1)  350  —  351  (1)
Other secured financings   1,532  (44)  (612)  52  1,016  (44)
Long-term borrowings   6,865  66  (5,175)  (308)  1,316  (84)

___________

(1)       Total realized and unrealized gains (losses) are primarily included in Principal transactions—Trading in the consolidated statements of income except for $1,165 million related to Financial instruments owned—Investments, which is included in Principal transactions—Investments.

(2)       Amounts represent unrealized gains (losses) for 2010 related to assets and liabilities still outstanding at December 31, 2010.

(3)       Net derivative and other contracts represent Financial instruments owned—Derivative and other contracts net of Financial instruments sold, not yet purchased—Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 12.

 
Quantitative Information about and Sensitivity of Significant Unobservable Inputs used in Recurring Level 3 Fair Value Measurements
     Balance at               
     December 31,              
     2012              
     (dollars   Significant Unobservable Input(s) /           
     in Valuation   Sensitivity of the Fair Value to Changes        Weighted
     millions) Technique(s)  in the Unobservable Inputs Range(1) Average
                    
Assets                
Financial instruments owned:                
 Corporate and other debt:                
  Commercial mortgage-backed                 
   securities$ 232 Comparable pricing Comparable bond price / (A)  46to 100points 76points
  Asset-backed securities  109 Discounted cash flow Internal rate of return / (C)     21% 21%
  Corporate bonds   660 Comparable pricing Comparable bond price / (A)  0to 143points 24points
  Collateralized debt obligations   1,951 Comparable pricing Comparable bond price / (A)  15to 88points 59points
   Correlation model Credit correlation / (B)  15to 45% 40%
  Loans and lending commitments  4,694 Corporate loan model Credit spread / (C)  17to 1,004basis points 281basis points
  Comparable pricing Comparable bond price / (A)  80to 120points 104points
  Comparable pricing Comparable loan price / (A)  55to 100points 88points
 Corporate equities(2)   288 Net asset value0Discount to net asset value / (C)  0to 37% 8%
  Comparable pricingDiscount to comparable equity price / (C) 0to  27points 14points
  Market approachEarnings before interest, taxes, depreciation and amortization ("EBITDA") multiple / (A)    6times 6times
 Net derivative and other contracts:                
  Interest rate contracts   (82) Option model Interest rate volatility concentration liquidity multiple / (C)(D)  0to 8times  See (3)
    Comparable bond price / (A)(D) 5to  98points   
    Interest rate - Foreign exchange correlation / (A)(D) 2to 63%   
    Interest rate volatility skew / (A)(D) 9to 95%   
      Interest rate quanto correlation / (A)(D)  -53to 33%   
      Interest rate curve correlation / (A)(D)  48to 99%   
      Inflation volatility / (A)(D)  49to  100%   
     Discounted cash flow Forward commercial paper rate-LIBOR basis / (A)  -18to 95basis points   
  Credit contracts   1,822 Comparable pricing Cash synthetic basis / (C)  2to 14points  See (4)
 Comparable bond price / (C) 0to 80points   
 Correlation modelCredit correlation / (B) 14to 94%   
  Foreign exchange contracts(5)   (359) Option model Comparable bond price / (A)(D)  5to 98points  See (6)
      Interest rate quanto correlation / (A)(D)  -53to  33%   
      Interest rate - Credit spread correlation / (A)(D)  -59to 65%   
      Interest rate - Foreign exchange correlation / (A)(D)  2to 63%   
      Interest rate volatility skew / (A)(D)  9to  95%   
  Equity contracts(5)   (1,144) Option model At the money volatility / (C)(D)   7to 24%  See (7)
      Volatility skew / (C)(D)  -2to 0%   
      Equity - Equity correlation / (C)(D)  40to 96%   
      Equity - Foreign exchange correlation / (C)(D)  -70to 38%   
      Equity - Interest rate correlation / (C)(D)  18to 65%   
  Commodity contracts   709 Option model Forward power price / (C)(D) $28to$84per   
         Megawatt hour   
      Commodity volatility / (A)(D)  17to 29%   
      Cross commodity correlation / (C)(D)  43to 97%   
 Investments(2):                
  Principal investments  2,833 Discounted cash flow Implied weighted average cost of capital / (C)(D)  8to 15% 9%
      Exit multiple / (A)(D)  5to 10times 9times
     Discounted cash flow Capitalization rate / (C)(D)   6to 10% 7%
      Equity discount rate / (C)(D)   15to 35% 23%
     Market approach EBITDA multiple / (A)  3to 17times 10times
  Other  486 Discounted cash flow Implied weighted average cost of capital / (C)(D)     11% 11%
      Exit multiple / (A)(D)     6times 6times
     Market approach EBITDA multiple / (A)  6to 8times 7times
Liabilities                
Financial instruments sold,                 
 not yet purchased:                
 Corporate and other debt:                
  Corporate bonds $ 177 Comparable pricing Comparable bond price / (A)  0to 150points 50points
Securities sold under agreements                 
 to repurchase  151 Discounted cash flow Funding spread / (A)  110to 184basis points 166basis points
Other secured financings   406 Comparable pricing Comparable bond price / (A)  55to 139points 102points
     Discounted cash flow Funding spread / (A)  183to 186basis points 184basis points
Long-term borrowings   2,789 Option model At the money volatility / (A)(D)  20to 24% 24%
      Volatility skew / (A)(D)  -1to 0% 0%
      Equity - Equity correlation / (C)(D)  50to 90% 77%
      Equity - Foreign exchange correlation / (A)(D)  -70to 36% -15%

___________________

(1) The ranges of significant unobservable inputs are represented in points, percentages, basis points, times or megawatt hours. Points are a percentage of par; for example, 100 points would be 100% of par. A basis point equals 1/100th of 1%; for example, 1,004 basis points would equal 10.04%. 

(2)       Investments in funds measured using an unadjusted net asset value are excluded.

(3) See below for a qualitative discussion of the wide unobservable input ranges for comparable bond prices, interest rate volatility skew, interest rate quanto correlation and forward commercial paper rate–LIBOR basis.

(4) See below for a qualitative discussion of the wide unobservable input ranges for comparable bond prices and credit correlation.

(5) Includes derivative contracts with multiple risks (i.e., hybrid products).

(6) See below for a qualitative discussion of the wide unobservable input ranges for comparable bond prices, interest rate quanto correlation, interest rate-credit spread correlation and interest rate volatility skew.

(7) See below for a qualitative discussion of the wide unobservable input range for equity-foreign exchange correlation.

 

 
Fair Value of Investments that Calculate Net Asset Value
  At December 31, 2012At December 31, 2011
     Unfunded   Unfunded
   Fair Value Commitment Fair Value Commitment
  (dollars in millions)
Private equity funds$ 2,179$ 644$ 1,906$ 938
Real estate funds  1,376  221  1,188  448
Hedge funds(1):        
 Long-short equity hedge funds  475  ─  545  5
 Fixed income/credit-related hedge funds  86  ─  124  ─
 Event-driven hedge funds  52  ─  163  ─
 Multi-strategy hedge funds  321  3  335  ─
Total$ 4,489$ 868$ 4,261$ 1,391

 

(1)       Fixed income/credit-related hedge funds, event-driven hedge funds, and multi-strategy hedge funds are redeemable at least on a six-month period basis primarily with a notice period of 90 days or less. At December 31, 2012, approximately 36% of the fair value amount of long-short equity hedge funds is redeemable at least quarterly, 38% is redeemable every six months and 26% of these funds have a redemption frequency of greater than six months. The notice period for long-short equity hedge funds at December 31, 2012 is primarily greater than six months. At December 31, 2011, approximately 38% of the fair value amount of long-short equity hedge funds is redeemable at least quarterly, 32% is redeemable every six months and 30% of these funds have a redemption frequency of greater than six months. The notice period for long-short equity hedge funds at December 31, 2011 is primarily greater than six months.

 
Net Gains (Losses) Due to Changes in Fair Value for Items Measured at Fair Value Pursuant to the Fair Value Option Election
   Principal Interest Gains (Losses)
   Transactions— Income Included in
   Trading (Expense) Net Revenues
        
   (dollars in millions)
Year Ended December 31, 2012      
Federal funds sold and securities purchased under      
  agreements to resell$ 8$ 5$ 13
Deposits   57  (86)  (29)
Commercial paper and other short-term borrowings(1)   (31)  ─  (31)
Securities sold under agreements to repurchase  (15)  (4)  (19)
Long-term borrowings(1)   (5,687)  (1,321)  (7,008)
        
Year Ended December 31, 2011      
Federal funds sold and securities purchased under      
  agreements to resell$ 12$ ─$ 12
Deposits   66  (117)  (51)
Commercial paper and other short-term borrowings(1)   567  ─  567
Securities sold under agreements to repurchase  3  (7)  (4)
Long-term borrowings(1)   4,204  (1,075)  3,129
        
Year Ended December 31, 2010      
Deposits $ 2$ (173)$ (171)
Commercial paper and other short-term borrowings(1)   (8)  ─  (8)
Securities sold under agreements to repurchase  9  (1)  8
Long-term borrowings(1)   (872)  (849)  (1,721)

 

(1)       Of the total gains (losses) recorded in Principal transactions—Trading for short-term and long-term borrowings for 2012, 2011 and 2010, $(4,402) million, $3,681 million and $(873) million, respectively, are attributable to changes in the credit quality of the Company, and the respective remainder is attributable to changes in foreign currency rates or interest rates or movements in the reference price or index for structured notes before the impact of related hedges.

 
Breakdown of Outstanding Short-term and Long-term Borrowings
   Short-term and Long-term
    Borrowings
   At At
   December 31, December 31,
Business Unit 2012 2011
   (dollars in millions)
Interest rates$ 23,330$ 23,188
Equity  17,326  13,926
Credit and foreign exchange  3,337  3,012
Commodities  776  876
 Total$ 44,769$ 41,002
      
Gains (Losses) Due to Changes in Instrument Specific Credit Risk
  2012 2011 2010
  (dollars in millions)
Short-term and long-term borrowings(1)$ (4,402)$ 3,681$ (873)
Loans(2)  340  (585)  448
Unfunded lending commitments(3)  1,026  (787)  (148)

_____________

(1)       The change in the fair value of short-term and long-term borrowings (primarily structured notes) includes an adjustment to reflect the change in credit quality of the Company based upon observations of the Company's secondary bond market spreads.

(2)       Instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates.

(3)       Gains (losses) were generally determined based on the differential between estimated expected client yields and contractual yields at each respective period end.

 
Amount by Which Contractual Principal Amount Exceeds Fair Value
  Contractual Principal Amount Exceeds Fair Value
  At At
  December 31, December 31,
  2012 2011
 (dollars in billions)
Short-term and long-term borrowings(1)$ (0.4)$ 2.5
Loans(2)   25.2  27.2
Loans 90 or more days past due and/or on non-accrual status(2)(3)  20.5  22.1

_____________

(1)       These amounts do not include structured notes where the repayment of the initial principal amount fluctuates based on changes in the reference price or index.

(2)       The majority of this difference between principal and fair value amounts emanates from the Company's distressed debt trading business, which purchases distressed debt at amounts well below par.

(3)       The aggregate fair value of loans that were in non-accrual status, which includes all loans 90 or more days past due, was $1.4 billion and $2.0 billion at December 31, 2012 and December 31, 2011, respectively. The aggregate fair value of loans that were 90 or more days past due was $0.8 billion and $1.5 billion at December 31, 2012 and December 31, 2011, respectively.

 
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
     Fair Value Measurements Using:  
     Quoted Prices      
     in Active      
   Carrying Markets for Significant Significant Total
   Value at Identical Observable Unobservable  Gains (Losses)
   December 31, Assets Inputs Inputs for
   2012 (Level 1) (Level 2) (Level 3) 2012(1)
  (dollars in millions)
Loans(2)$ 1,821$ ─$ 277$ 1,544$ (60)
Other investments(3)  90  ─  ─  90  (37)
Premises, equipment and software costs(4)  33  ─  ─  33  (170)
Intangible assets(3)  ─  ─  ─  ─  (4)
Total$ 1,944$ ─$ 277$ 1,667$ (271)

_____________

(1)       Losses are recorded within Other expenses in the consolidated statements of income except for fair value adjustments related to Loans and losses related to Other investments, which are included in Other revenues.

(2)       Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models. The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

(3)       Losses recorded were determined primarily using discounted cash flow models.

(4)       Losses were determined using discounted cash flow models and primarily represented the write-off of the carrying value of certain premises and software that were abandoned during 2012 in association with the Morgan Stanley Wealth Management integration.

 

     Fair Value Measurements Using:  
     Quoted Prices      
     in Active      
   Carrying Markets for Significant Significant Total
   Value at Identical Observable Unobservable Gains (Losses)
   December 31, Assets Inputs Inputs for
   2011 (Level 1) (Level 2) (Level 3) 2011(1)
  (dollars in millions)
Loans(2)$ 70$ ─$ ─$ 70$ 5
Other investments(3)  71  ─  ─  71  (52)
Premises, equipment and software          
 costs(3)  4  ─  ─  4  (7)
Intangible assets(4)  ─  ─  ─  ─  (7)
Total$ 145$ ─$ ─$ 145$ (61)

____________

(1)       Losses are recorded within Other expenses in the consolidated statements of income except for fair value adjustments related to Loans and losses related to Other investments, which are included in Other revenues.

(2) Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models. The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

(3)       Losses recorded were determined primarily using discounted cash flow models.

(4)       Losses were determined primarily using discounted cash flow models or a valuation technique incorporating an observable market index.

 

     Fair Value Measurements Using:  
     Quoted Prices      
     in Active      
   Carrying Markets for Significant Significant Total
   Value at Identical Observable Unobservable Gains (Losses)
   December 31, Assets Inputs Inputs  for
   2010 (Level 1) (Level 2) (Level 3) 2010(1)
  (dollars in millions)
Loans(2)$ 680$ ─$ 151$ 529$ (12)
Other investments(3)  88  ─  ─  88  (19)
Goodwill(4)  ─  ─  ─  ─  (27)
Intangible assets(5)  3  ─  ─  3  (174)
Total$ 771$ ─$ 151$ 620$ (232)

___________________

(1)       Losses related to Loans, impairments related to Other investments and losses related to Goodwill and certain Intangibles associated with the disposition of FrontPoint Partners LLC (“FrontPoint”) are included in Other revenues in the consolidated statements of income (see Notes 19 and 24 for further information on FrontPoint). Remaining losses were included in Other expenses in the consolidated statements of income.

(2)       Non-recurring changes in fair value for loans held for investment were calculated based upon the fair value of the underlying collateral. The fair value of the collateral was determined using internal expected recovery models. The non-recurring change in fair value for mortgage loans held for sale is based upon a valuation model incorporating market observable inputs.

(3)       Losses recorded were determined primarily using discounted cash flow models.

(4)       Loss relates to FrontPoint, determined primarily using discounted cash flow models (see Notes 19 and 24 for further information on FrontPoint).

(5)       Losses primarily related to investment management contracts, including contracts associated with FrontPoint, and were determined primarily using discounted cash flow models.

 
Financial Instruments Not Carried at Fair Value on a Recurring Basis
   At December 31, 2012 Fair Value Measurements Using:
   Carrying Value  Fair Value  Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
            
   (dollars in millions)
Financial Assets:          
Cash and due from banks$ 20,878$ 20,878$ 20,878$ —$ —
Interest bearing deposits with banks  26,026  26,026  26,026  —  —
Cash deposited with clearing organizations or segregated under federal and          
 other regulations or requirements  30,970  30,970  30,970  —  —
Federal funds sold and securities purchased under agreements to resell  133,791  133,792  —  133,035  757
Securities borrowed  121,701  121,705  —  121,691  14
Receivables(1):          
 Customers   46,197  46,197  —  46,197  —
 Brokers, dealers and clearing organizations  7,335  7,335  —  7,335  —
 Fees, interest and other  6,170  6,102  —  —  6,102
Loans(2)   29,046  27,263  —  5,307  21,956
            
Financial Liabilities:           
Deposits$ 81,781$ 81,781$ —$ 81,781$ —
Commercial paper and other short-term borrowings  1,413  1,413  —  1,107  306
Securities sold under agreements to repurchase  122,311  122,389  —  111,722  10,667
Securities loaned  36,849  37,163  —  35,978  1,185
Other secured financings  6,261  6,276  —  3,649  2,627
Payables(1):          
 Customers  122,540  122,540  —  122,540  —
 Brokers, dealers and clearing organizations  2,497  2,497  —  2,497  —
Long-term borrowings  125,527  126,683  —  116,511  10,172

___________________

(1) Accrued interest, fees and dividend receivables and payables where carrying value approximates fair value have been excluded.

(2) Includes all loans measured at fair value on a non-recurring basis.