Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive loss. The following table displays our investments in trading securities and the cumulative amount of net losses recognized from holding these securities as of June 30, 2011 and December 31, 2010.

			As of
			June 30,		December 31,
			2011		2010
			(Dollars in millions)
Mortgage-related securities:
	Fannie Mae		$	7,343	$	7,398
	Freddie Mac			1,392		1,326
	Ginnie Mae			301		590
	Alt-A private-label securities			1,568		1,683
	Subprime private-label securities			1,459		1,581
	CMBS			10,976		10,764
	Mortgage revenue bonds			616		609
	Other mortgage-related securities			154		152
		Total		23,809		24,103
Non-mortgage-related securities:
	U.S. Treasury securities			34,856		27,432
	Asset-backed securities			3,242		5,321
		Total		38,098		32,753
Total trading securities			$	61,907	$	56,856
Losses in trading securities held in our portfolio, net			$	1,758	$	2,149

The following table displays information about our net trading gains and losses for the three and six months ended June 30, 2011 and 2010.

				For the Three				For the Six
				Months Ended				Months Ended
				June 30,				June 30,
			2011		2010		2011		2010
			(Dollars in millions)
Net trading gains:
	Mortgage-related securities		$	131	$	612	$	360	$	1,618
	Non-mortgage-related securities			4		28		-		80
		Total	$	135	$	640	$	360	$	1,698
Net trading gains recorded in the period related to
	securities still held at period end:
	Mortgage-related securities		$	131	$	567	$	354	$	1,499
	Non-mortgage-related securities			7		24		8		70
		Total	$	138	$	591	$	362	$	1,569

We measure AFS securities at fair value with unrealized gains and losses recorded as a component of “Other comprehensive income,” net of tax, and we record realized gains and losses from the sale of AFS securities in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive loss.

The following table displays the gross realized gains, losses and proceeds on sales of AFS securities for the three and six months ended June 30, 2011 and 2010.

__________

⁽¹⁾	Excludes proceeds from the initial sale of securities from new portfolio securitizations included in "Note 2, Consolidations and Transfers of Financial Assets." For the three and six months ended June 30, 2010, proceeds were reduced by $455 million and $874 million, respectively, from what was previously disclosed, primarily related to deconsolidated REMICs that should have been presented as proceeds from issuance of long-term debt of consolidated trusts.

The following tables display the amortized cost, gross unrealized gains and losses and fair value by major security type for AFS securities we held as of June 30, 2011 and December 31, 2010.

	As of June 30, 2011
					Gross		Gross
	Total		Gross		Unrealized		Unrealized		Total
	Amortized		Unrealized		Losses -		Losses -		Fair
	Cost⁽¹⁾		Gains		OTTI⁽²⁾		Other⁽³⁾		Value
	(Dollars in millions)
Fannie Mae	$	18,717	$	1,379	$	(28)	$	(3)	$	20,065
Freddie Mac		13,564		971		-		-		14,535
Ginnie Mae		838		128		-		-		966
Alt-A private-label securities		14,913		173		(1,783)		(201)		13,102
Subprime private-label securities		10,905		9		(1,563)		(442)		8,909
CMBS⁽⁴⁾		14,802		144		-		(101)		14,845
Mortgage revenue bonds		10,931		78		(55)		(481)		10,473
Other mortgage-related securities		3,887		118		(18)		(266)		3,721
Total	$	88,557	$	3,000	$	(3,447)	$	(1,494)	$	86,616

	As of December 31, 2010
					Gross		Gross
	Total		Gross		Unrealized		Unrealized		Total
	Amortized		Unrealized		Losses -		Losses -		Fair
	Cost⁽¹⁾		Gains		OTTI⁽²⁾		Other⁽³⁾		Value
	(Dollars in millions)
Fannie Mae	$	21,428	$	1,453	$	(9)	$	(44)	$	22,828
Freddie Mac		15,986		1,010		-		-		16,996
Ginnie Mae		909		130		-		-		1,039
Alt-A private-label securities		15,789		177		(1,791)		(285)		13,890
Subprime private-label securities		11,323		54		(997)		(448)		9,932
CMBS⁽⁴⁾		15,273		25		-		(454)		14,844
Mortgage revenue bonds		11,792		47		(64)		(734)		11,041
Other mortgage-related securities		4,098		106		(44)		(338)		3,822
Total	$	96,598	$	3,002	$	(2,905)	$	(2,303)	$	94,392

__________

⁽¹⁾	Amortized cost includes unamortized premiums, discounts and other cost basis adjustments as well as the credit component of other-than-temporary impairments recognized in our condensed consolidated statements of operations and comprehensive loss.

⁽²⁾	Represents the noncredit component of other-than-temporary impairment losses recorded in "Accumulated other comprehensive loss" as well as cumulative changes in fair value for securities for which we previously recognized the credit component of an other-than-temporary impairment.

⁽³⁾	Represents the gross unrealized losses on securities for which we have not recognized an other-than-temporary impairment.

⁽⁴⁾	Amortized cost includes $763 million and $848 million as of June 30, 2011 and December 31, 2010, respectively, of increase to the carrying amount from previous fair value hedge accounting.

The following tables display additional information regarding gross unrealized losses and fair value by major security type for AFS securities in an unrealized loss position that we held as of June 30, 2011 and December 31, 2010.

	As of June 30, 2011
	Less Than 12				12 Consecutive
	Consecutive Months				Months or Longer
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
	(Dollars in millions)

Fannie Mae	$	(18)	$	942	$	(13)	$	191
Alt-A private-label securities		(102)		1,724		(1,882)		7,821
Subprime private-label securities		(120)		888		(1,885)		7,707
CMBS		(8)		2,792		(93)		3,092
Mortgage revenue bonds		(78)		2,434		(458)		3,006
Other mortgage-related securities		(10)		398		(274)		1,849
Total	$	(336)	$	9,178	$	(4,605)	$	23,666



	As of December 31, 2010
	Less Than 12				12 Consecutive
	Consecutive Months				Months or Longer
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
	(Dollars in millions)

Fannie Mae	$	(35)	$	1,461	$	(18)	$	211
Alt-A private-label securities		(104)		1,915		(1,972)		9,388
Subprime private-label securities		(47)		627		(1,398)		8,493
CMBS		(15)		1,774		(439)		10,396
Mortgage revenue bonds		(206)		5,009		(592)		3,129
Other mortgage-related securities		(2)		262		(380)		2,014
Total	$	(409)	$	11,048	$	(4,799)	$	33,631

We recognize the credit component of other-than-temporary impairments of our debt securities in our condensed consolidated statements of operations and comprehensive loss and the noncredit component in “Other comprehensive income” for those securities that we do not intend to sell and for which it is not more likely than not that we will be required to sell before recovery.

The fair value of our securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral and in the credit performance of the underlying issuer, among other factors. $4.6 billion of the $4.9 billion of gross unrealized losses on AFS securities as of June 30, 2011 have existed for a period of 12 consecutive months or longer. Gross unrealized losses on AFS securities as of June 30, 2011 include unrealized losses on securities with other-than-temporary impairment in which a portion of the impairment remains in “Accumulated other comprehensive loss.” The securities with unrealized losses for 12 consecutive months or longer, on average, had a fair value as of June 30, 2011 that was 84% of their amortized cost basis. Based on our review for impairments of AFS securities, which includes an evaluation of the collectibility of cash flows and any intent or requirement to sell the securities, we have concluded that we do not have an intent to sell and we believe it is not more likely than not that we will be required to sell the securities. Additionally, our projections of cash flows indicate that we will recover a portion or the majority of these unrealized losses over the lives of the securities.

The following table displays our net other-than-temporary impairments by major security type recognized in our condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2011 and 2010.

For the three and six months ended June 30, 2011, we recorded net other-than-temporary impairment of $56 million and $100 million, respectively. The net other-than-temporary impairment charges recorded in the three month period ended June 30, 2011 were primarily driven by an increase in collateral losses on certain Alt-A private-label securities, which resulted in a decrease in the present value of our cash flow projections on these Alt-A private-label securities.

The following table displays activity related to the unrealized credit component on debt securities held by us recognized in earnings for the three and six months ended June 30, 2011 and 2010. A related unrealized non-credit component has been recognized in “Accumulated other comprehensive loss.”

		For the Three Months				For the Six Months
		Ended June 30,				Ended June 30,
		2011		2010			2011		2010
		(Dollars in millions)
Balance, beginning of period		$	8,040	$	8,209	$	8,215	$	8,191
Additions for the credit component on debt securities for which OTTI
	was not previously recognized		-		9		8		15
Additions for credit losses on debt securities for which OTTI was
	previously recognized		56		128		92		358
Reductions for securities no longer in portfolio at period end			-		(1)		-		(52)
Reductions for amortization resulting from increases in cash flows
	expected to be collected over the remaining life of the securities		(220)		(164)		(439)		(331)
Balance, end of period		$	7,876	$	8,181	$	7,876	$	8,181

As of June 30, 2011, those debt securities with other-than-temporary impairment for which we recognized in our condensed consolidated statements of operations and comprehensive loss only the amount of loss related to credit consisted predominantly of Alt-A and subprime securities. We evaluate Alt-A (including option adjustable rate mortgage (“ARM”)) and subprime private-label securities for other-than-temporary impairment by discounting the projected cash flows from econometric models to estimate the portion of loss in value attributable to credit. Separate components of a third-party model project regional home prices, unemployment and interest rates. The model combines these factors with available current information regarding attributes of loans in pools backing the private-label mortgage-related securities to project prepayment speeds, conditional default rates, loss severities and delinquency rates. It incorporates detailed information on security-level subordination levels and cash flow priority of payments to project security level cash flows. We model securities assuming the benefit of those external financial guarantees that we determined are creditworthy. We have recorded other-than-temporary impairments for the three and six months ended June 30, 2011 based on this analysis, with amounts related to credit loss recognized in our condensed consolidated statements of operations and comprehensive loss. For securities we determined were not other-than-temporarily impaired, we concluded that either the bond had no projected credit loss or if we projected a loss, that the present value of expected cash flows was greater than the security's cost basis.

The following table displays the modeled attributes, including default rates and severities, which are used to determine whether our senior interests in certain non-agency mortgage-related securities will experience a cash shortfall. Assumption of voluntary prepayment rates is also an input to the present value of expected losses.

			As of June 30, 2011
					Alt-A
			Subprime		Option ARM			Fixed Rate			Variable Rate			Hybrid Rate
			(Dollars in millions)
Vintage Year
2004 & Prior:
	Unpaid principal balance	$	2,109		$	498		$	3,614		$	516		$	2,379
	Weighted average collateral default⁽¹⁾		37.9	%		38.5	%		11.4	%		32.9	%		15.8	%
	Weighted average collateral severities⁽²⁾		58.5	%		50.6	%		45.5	%		39.9	%		35.6	%
	Weighted average voluntary prepayment rates⁽³⁾		6.4	%		9.9	%		9.9	%		8.2	%		9.9	%
	Average credit enhancement⁽⁴⁾		51.2	%		17.3	%		12.0	%		22.1	%		10.6	%
2005
	Unpaid principal balance	$	188		$	1,348		$	1,231		$	553		$	2,452
	Weighted average collateral default⁽¹⁾		73.3	%		59.3	%		40.7	%		55.7	%		39.2	%
	Weighted average collateral severities⁽²⁾		70.8	%		58.6	%		60.2	%		56.3	%		46.1	%
	Weighted average voluntary prepayment rates⁽³⁾		2.3	%		5.4	%		7.3	%		6.6	%		7.8	%
	Average credit enhancement⁽⁴⁾		64.9	%		28.2	%		1.8	%		18.6	%		5.9	%
2006
	Unpaid principal balance	$	12,044		$	1,289		$	585		$	1,672		$	1,786
	Weighted average collateral default⁽¹⁾		77.8	%		74.6	%		41.7	%		59.0	%		32.7	%
	Weighted average collateral severities⁽²⁾		71.2	%		61.8	%		64.0	%		57.8	%		49.2	%
	Weighted average voluntary prepayment rates⁽³⁾		2.2	%		2.8	%		6.8	%		5.9	%		8.3	%
	Average credit enhancement⁽⁴⁾		18.8	%		21.8	%		1.2	%		0.9	%		1.2	%
2007 & After:
	Unpaid principal balance	$	624		$	-		$	-		$	-		$	122
	Weighted average collateral default⁽¹⁾		79.5	%		N/A			N/A			N/A			43.5	%
	Weighted average collateral severities⁽²⁾		66.9	%		N/A			N/A			N/A			55.7	%
	Weighted average voluntary prepayment rates⁽³⁾		1.9	%		N/A			N/A			N/A			6.9	%
	Average credit enhancement⁽⁴⁾		34.1	%		N/A			N/A			N/A			26.1	%
Total
	Unpaid principal balance	$	14,965		$	3,135		$	5,430		$	2,741		$	6,739
	Weighted average collateral default⁽¹⁾		72.2	%		62.3	%		21.3	%		53.4	%		29.3	%
	Weighted average collateral severities⁽²⁾		69.3	%		58.6	%		50.8	%		54.1	%		43.4	%
	Weighted average voluntary prepayment rates⁽³⁾		2.8	%		5.0	%		9.0	%		6.5	%		8.7	%
	Average credit enhancement⁽⁴⁾		24.6	%		23.8	%		8.6	%		8.5	%		6.7	%

__________
⁽¹⁾	The expected remaining cumulative default rate of the collateral pool backing the securities, as a percentage of the current
	collateral unpaid principal balance, weighted by security unpaid principal balance.
⁽²⁾	The expected remaining loss given default of the collateral pool backing the securities, calculated as the ratio of remaining
	cumulative loss divided by cumulative defaults, weighted by security unpaid principal balance.
⁽³⁾	The average monthly voluntary prepayment rate, weighted by security unpaid principal balance.
⁽⁴⁾	The average percent current credit enhancement provided by subordination of other securities. Excludes excess interest
	projections and monoline bond insurance.

The following table displays the amortized cost and fair value of our AFS securities by major security type and remaining maturity, assuming no principal prepayments, as of June 30, 2011. Contractual maturity of mortgage-backed securities is not a reliable indicator of their expected life because borrowers generally have the right to prepay their obligations at any time.

	As of June 30, 2011
									After One Year				After Five Years
	Total		Total		One Year or Less				Through Five Years				Through Ten Years				After Ten Years
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value		Cost		Value		Cost		Value
		(Dollars in millions)
Fannie Mae	$	18,717	$	20,065	$	-	$	-	$	1	$	1	$	3,363	$	3,570	$	15,353	$	16,494
Freddie Mac		13,564		14,535		2		2		36		39		1,404		1,516		12,122		12,978
Ginnie Mae		838		966		-		-		-		-		5		6		833		960
Alt-A private-label securities		14,913		13,102		-		-		1		1		264		268		14,648		12,833
Subprime private-label securities		10,905		8,909		-		-		-		-		-		-		10,905		8,909
CMBS		14,802		14,845		-		-		3,631		3,693		10,560		10,556		611		596
Mortgage revenue bonds		10,931		10,473		58		58		364		374		756		765		9,753		9,276
Other mortgage-related securities		3,887		3,721		-		-		-		-		-		14		3,887		3,707
Total	$	88,557	$	86,616	$	60	$	60	$	4,033	$	4,108	$	16,352	$	16,695	$	68,112	$	65,753

The following table displays our accumulated other comprehensive loss by major categories as of June 30, 2011 and December 31, 2010.

		As of
		June 30,		December 31,
		2011		2010
		(Dollars in millions)
Net unrealized gains on available-for-sale securities for which
	we have not recorded other-than-temporary impairment, net of tax	$	862	$	304
Net unrealized losses on available-for-sale securities for which we have
	recorded other-than-temporary impairment, net of tax		(2,123)		(1,736)
Other			(238)		(250)
	Accumulated other comprehensive loss	$	(1,499)	$	(1,682)

The following table displays the activity in other comprehensive income, net of tax, by major categories for the three and six months ended June 30, 2011 and 2010.

				For the Three				For the Six
				Months Ended				Months Ended
				June 30,				June 30,
				2011		2010		2011		2010
				(Dollars in millions)
Comprehensive income (loss):
	Net loss			$	(2,892)	$	(1,223)	$	(9,363)	$	(12,752)
	Other comprehensive income, net of tax:
		Changes in net unrealized losses on available-for-sale
			securities (net of tax benefit of $19 and tax of $799,
			respectively, for the three months ended and net of tax
			of $68 and $1,509 respectively, for the six months ended)		(34)		1,484		127		2,802
		Reclassification adjustment for other-than-temporary
			impairments recognized in net loss (net of tax of $15
			and $45, respectively, for the three months ended and
			$28 and $126, respectively, for the six months ended)		40		92		72		247
		Reclassification adjustment for (gains) losses included in
			net loss (net of tax of $3 and tax benefit of $50,
			respectively for the three months ended and net of tax of $11 and $6, respectively, for the six months ended)		(7)		91		(21)		(12)
		Other			3		3		5		5
	Other comprehensive income				2		1,670		183		3,042
	Total comprehensive income (loss)			$	(2,890)	$	447	$	(9,180)	$	(9,710)