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Netting Arrangements
12 Months Ended
Dec. 31, 2016
Offsetting [Abstract]  
Netting Arrangements
Netting Arrangements
We use master netting arrangements, which allow us to offset certain financial instruments and collateral with the same counterparty, to minimize counterparty credit exposure. The tables below display information related to derivatives, securities purchased under agreements to resell or similar arrangements, and securities sold under agreements to repurchase or similar arrangements, which are subject to an enforceable master netting arrangement or similar agreement that are either offset or not offset in our consolidated balance sheets.
 
As of December 31, 2016
 
 
 
 
 
 
Net Amount Presented in our Consolidated Balance Sheets
 
Amounts Not Offset in our Consolidated Balance Sheets
 
 
 
Gross Amount
 
Gross Amount Offset(1)
 
 
Financial Instruments(2)
 
Collateral(3)
 
Net Amount
 
(Dollars in millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTC risk management derivatives
$
3,688

 
$
(3,667
)
 
 
 
$
21

 
 
 
$

 
 
$

 
$
21

Cleared risk management derivatives
849

 
(847
)
 
 
 
2

 
 
 

 
 

 
2

Mortgage commitment derivatives
631

 

 
 
 
631

 
 
 
(357
)
 
 
(22
)
 
252

Total derivative assets
5,168

 
(4,514
)
 
 
 
654

(4 
) 
 
 
(357
)
 
 
(22
)
 
275

Securities purchased under agreements to resell or similar arrangements(5)
51,115

 

 
 
 
51,115

 
 
 

 
 
(51,115
)
 

Total assets
$
56,283

 
$
(4,514
)
 
 
 
$
51,769

 
 
 
$
(357
)
 
 
$
(51,137
)
 
$
275

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTC risk management derivatives
$
(4,905
)
 
$
4,520

 
 
 
$
(385
)
 
 
 
$

 
 
$

 
$
(385
)
Cleared risk management derivatives
(2,415
)
 
2,324

 
 
 
(91
)
 
 
 

 
 
91

 

Mortgage commitment derivatives
(737
)
 

 
 
 
(737
)
 
 
 
357

 
 
16

 
(364
)
Total derivative liabilities
(8,057
)
 
6,844

 
 
 
(1,213
)
(4 
) 
 
 
357

 
 
107

 
(749
)
Total liabilities
$
(8,057
)
 
$
6,844

 
 
 
$
(1,213
)
 
 
 
$
357

 
 
$
107

 
$
(749
)
 
As of December 31, 2015
 
 
 
 
 
 
Net Amount Presented in our Consolidated Balance Sheets
 
Amounts Not Offset in our Consolidated Balance Sheets
 
 
 
Gross Amount
 
Gross Amount Offset(1)
 
 
Financial Instruments(2)
 
Collateral(3)
 
Net Amount
 
(Dollars in millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTC risk management derivatives
$
4,042

 
$
(4,021
)
 
 
 
$
21

 
 
 
$

 
 
$
(18
)
 
$
3

Cleared risk management derivatives
708

 
(3
)
 
 
 
705

 
 
 

 
 

 
705

Mortgage commitment derivatives
140

 

 
 
 
140

 
 
 
(119
)
 
 
(3
)
 
18

Total derivative assets
4,890

 
(4,024
)
 
 
 
866

(4 
) 
 
 
(119
)
 
 
(21
)
 
726

Securities purchased under agreements to resell or similar arrangements(5)
37,950

 

 
 
 
37,950

 
 
 

 
 
(37,950
)
 

Total assets
$
42,840

 
$
(4,024
)
 
 
 
$
38,816

 
 
 
$
(119
)
 
 
$
(37,971
)
 
$
726

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTC risk management derivatives
$
(6,118
)
 
$
5,861

 
 
 
$
(257
)
 
 
 
$

 
 
$

 
$
(257
)
Cleared risk management derivatives
(2,796
)
 
2,789

 
 
 
(7
)
 
 
 

 
 

 
(7
)
Mortgage commitment derivatives
(158
)
 

 
 
 
(158
)
 
 
 
119

 
 
(1
)
 
(40
)
Total derivative liabilities
(9,072
)
 
8,650

 
 
 
(422
)
(4 
) 
 
 
119

 
 
(1
)
 
(304
)
Securities sold under agreements to repurchase or similar arrangements
(62
)
 

 
 
 
(62
)
 
 
 

 
 
62

 

Total liabilities
$
(9,134
)
 
$
8,650

 
 
 
$
(484
)
 
 
 
$
119

 
 
$
61

 
$
(304
)
________
(1) 
Represents the effect of the right to offset under legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including cash collateral posted and received and accrued interest.
(2) 
Mortgage commitment derivative amounts reflect where we have recognized both an asset and a liability with the same counterparty under an enforceable master netting arrangement but we have not elected to offset the related amounts in our consolidated balance sheets.
(3) 
Represents non-cash collateral received that has not been recognized and not offset in our consolidated balance sheets as well as non-cash collateral posted which has been recognized but not offset in our consolidated balance sheets. Does not include collateral held or posted in excess of our exposure. The fair value of non-cash collateral we pledged was $1.3 billion and $197 million as of December 31, 2016 and December 31, 2015, respectively, which the counterparty was permitted to sell or repledge. The fair value of non-cash collateral received was $51.2 billion and $38.0 billion, of which $45.5 billion and $36.2 billion could be sold or repledged as of December 31, 2016 and December 31, 2015, respectively. None of the underlying collateral was sold or repledged as of December 31, 2016 and December 31, 2015.
(4) 
Excludes derivative assets of $33 million and $28 million as of December 31, 2016 and 2015, respectively, and derivative liabilities of $2 million recognized in our consolidated balance sheets as of December 31, 2016 and 2015, that are not subject to enforceable master netting arrangements.
(5) 
Includes $20.7 billion and $10.6 billion of securities purchased under agreements to resell classified as “Cash and cash equivalents” in our consolidated balance sheets as of December 31, 2016 and 2015, respectively.
Derivative instruments are recorded at fair value and securities purchased under agreements to resell or similar arrangements are recorded at amortized cost in our consolidated balance sheets.
We determine our rights to offset the assets and liabilities presented above with the same counterparty, including collateral posted or received, based on the contractual arrangements entered into with our individual counterparties and various rules and regulations that would govern the insolvency of a derivative counterparty. The following is a description, under various agreements, of the nature of those rights and their effect or potential effect on our financial position.
The terms of the majority of our contracts for OTC risk management derivatives are governed under master agreements of the International Swaps and Derivatives Association Inc. (“ISDA”). These agreements provide that all transactions entered into under the agreement with the counterparty constitute a single contractual relationship. An event of default by the counterparty allows the early termination of all outstanding transactions under the same ISDA agreement and we may offset all outstanding amounts related to the terminated transactions including collateral posted or received.
The terms of our contracts for cleared derivatives are governed under the rules of the clearing organization and the agreement between us and the clearing member of that clearing organization. In the event of a clearing organization default, all open positions at the clearing organization are closed and a net position (on a clearing member by clearing member basis) is calculated. Unless otherwise transferred, in the event of a clearing member default, all open positions cleared through that clearing member are closed and a net position is calculated.
The terms of our contracts for mortgage commitment derivatives are primarily governed by the Fannie Mae Single-Family Selling Guide (“Guide”), for Fannie Mae-approved lenders, or Master Securities Forward Transaction Agreements (“MSFTA”), for counterparties that are not Fannie Mae-approved lenders. In the event of default by the counterparty, both the Guide and the MSFTA allow us to terminate all outstanding transactions under the applicable agreement and offset all outstanding amounts related to the terminated transactions including collateral posted or received. Under the Guide, upon a lender event of default, we generally may offset any amounts owed to a lender against any amounts a lender may owe us under any other existing agreement, regardless of whether or not such other agreements are in default or payments are immediately due.
The terms of our contracts for securities purchased under agreements to resell and securities sold under agreements to repurchase are governed by Master Repurchase Agreements, which are based on the guidelines prescribed by the Securities Industry and Financial Markets Association. Master Repurchase Agreements provide that all transactions under the agreement constitute a single contractual relationship. An event of default by the counterparty allows the early termination of all outstanding transactions under the same agreement and we may offset all outstanding amounts related to the terminated transactions including collateral posted or received.
We also have securities purchased under agreements to resell which we transact through the Fixed Income Clearing Corporation (“FICC”). Under the rules of the FICC, all agreements for securities purchased under agreements to resell that are submitted to the FICC for clearing become transactions with the FICC that are subject to FICC clearing rules. In the event of a FICC default, all open positions at the FICC are closed and a net position is calculated.