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<p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><a name="tx1129640_21"> </a>Note 21. Expenses </b></font></p>
<p style="margin-top: 6px; text-indent: 4%; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In June 2010, we recorded an aggregate pre-tax charge of $<font class="_mt">414</font> million, including associated legal costs of $<font class="_mt">9</font> million, in our consolidated statement of income with respect to the cash collateral pools underlying SSgA-managed investment funds engaged in securities lending, as well as the cash collateral pools underlying our agency lending program. In connection with the charge, we made a one-time cash contribution of $<font class="_mt">330</font> million to the cash collateral pools and liquidity trusts underlying the SSgA lending funds. In light of our assessment with respect to previously disclosed asserted and unasserted claims and our evaluation of the ultimate resolution of such claims, as well as the effect of the redemption restrictions originally imposed by SSgA on the
lending funds and other considerations, we elected to make the cash contribution, which restored the net asset value per unit of the underlying cash collateral pools to $1.00 as of June 30, 2010. As a result of this action, SSgA removed the redemption restrictions from the SSgA lending funds in August 2010. </font></p>
<p style="margin-top: 6px; text-indent: 4%; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The pre-tax charge also included the establishment of a $<font class="_mt">75</font> million reserve to address certain potential inconsistencies in connection with our implementation of the redemption restrictions applicable to the cash collateral pools underlying our agency lending program. This charge was based on the results of a review of our implementation of the redemption restrictions with respect to participants in the agency lending collateral pools, and our assessment of the amount required to compensate clients for the dilutive effect of redemptions which may not have been consistent with the intent of the policy. </font></p>
<p style="margin-top: 6px; text-indent: 4%; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In June 2009, the Staff of the SEC provided State Street Bank with a "Wells" notice related to the SEC's ongoing investigation into disclosures and management by SSgA of certain of its active fixed-income strategies during 2007 and prior periods. Subsequent to the receipt of the Wells notice, we engaged in discussions with the SEC and other governmental and regulatory authorities regarding a potential settlement of this matter. Based on such discussions during the fourth quarter of 2009, we determined it appropriate to increase our reserve, initially established in 2007 to address litigation exposure and other costs associated with SSgA's management of these fixed-income strategies, by $<font class="_mt">250</font> million, to take into account such a potential settlement with these governmental authorities and the other ongoing litigation related
to the active fixed-income strategies. As a result, we recorded a provision of $<font class="_mt">250</font> million in our 2009 consolidated statement of income related to our estimate of this legal exposure. We settled regulatory inquiries related to this exposure in February 2010. </font></p>
<p style="margin-top: 6px; margin-bottom: 0px; font-size: 1px;"> </p>
<p style="margin-top: 0px; text-indent: 4%; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">During 2007 and 2008, the liquidity and pricing issues in the fixed-income securities markets adversely affected the market value of the securities in certain accounts managed by SSgA. These accounts, which are offered to retirement plans, allow participants to purchase and redeem units at a constant net asset value regardless of volatility in the underlying value of the assets held by the account. The accounts enter into contractual arrangements with independent third-party financial institutions that agree to make up any shortfall in the account if all the units are redeemed at the constant net asset value. The financial institutions have the right, under certain circumstances, to terminate this guarantee with respect to future investments in the account. </font></p>
<p style="margin-top: 6px; text-indent: 4%; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">During 2008, in reaction to the aforementioned issues, the third-party guarantors considered terminating their financial guarantees with the accounts. Although we were not statutorily or contractually obligated to do so, we elected to purchase approximately $<font class="_mt">2.49</font> billion of asset- and mortgage-backed securities from these accounts that had been identified as presenting increased risk in the then current market environment, which we classified in investment securities available for sale in our consolidated statement of condition, and to contribute an aggregate of $<font class="_mt">450</font> million to the accounts to improve the ratio of the market value of the accounts' portfolio holdings to the book value of the accounts. Accordingly, we recorded a provision of $<font class="_mt">450</font> million in our
2008 consolidated statement of income to provide for this infusion. </font></p>
<p style="margin-top: 6px; text-indent: 4%; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">During the third and fourth quarters of 2008, Lehman Brothers Holdings Inc., or Lehman, and certain of its affiliates filed for bankruptcy or other insolvency proceedings. While we had no unsecured financial exposure to Lehman or its affiliates, we indemnified certain customers in connection with collateralized repurchase agreements with Lehman entities. In the then current market environment, the market value of the underlying collateral had declined. To the extent that these declines resulted in collateral value falling below the indemnification obligation, we recorded a balance sheet reserve, and a corresponding provision, of $<font class="_mt">200</font> million in other expenses in our 2008 consolidated statement of income to provide for our estimated net exposure. The reserve was based on the cost of satisfying the indemnification obligation net of th
e fair value of the collateral, which we acquired subsequent to the Lehman proceedings. The collateral, composed of commercial real estate loans discussed in note 4, is recorded in loans and leases in our consolidated statement of condition. </font></p> </div>Note 21. Expenses
In June 2010, we recorded an aggregate pre-tax charge of $414 million, including associated legal costs offalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringOther Operating Expenses [Text Block]No authoritative reference available.falsefalse11ExpensesUnKnownUnKnownUnKnownUnKnownfalsetrue
