Securities Available for Sale

6 Months Ended

Jun. 30, 2011

Securities Available for Sale [Abstract]

Securities Available For Sale

Note 4: Securities Available for Sale

The following table provides the cost and fair value for the major categories of securities available for sale carried at fair value. The net unrealized gains (losses) are reported on an after-tax basis as a component of cumulative OCI. There were no securities classified as held to maturity as of the periods presented.

			Gross		Gross
			unrealized		unrealized			Fair
(in millions)	Cost		gains		losses			value
June 30, 2011
Securities of U.S. Treasury and federal agencies	$	10,490		46		(13	)		10,523
Securities of U.S. states and political subdivisions		24,173		802		(563	)		24,412
Mortgage-backed securities:
Federal agencies		74,472		3,892		(26	)		78,338
Residential		16,835		1,843		(318	)		18,360
Commercial		13,889		1,335		(496	)		14,728
Total mortgage-backed securities		105,196		7,070		(840	)		111,426
Corporate debt securities		10,584		1,388		(75	)		11,897
Collateralized debt obligations (1)		6,951		467		(186	)		7,232
Other (2)		16,132		507		(186	)		16,453
Total debt securities		173,526		10,280		(1,863	)		181,943
Marketable equity securities:
Perpetual preferred securities		2,930		286		(72	)		3,144
Other marketable equity securities		569		645		(3	)		1,211
Total marketable equity securities		3,499		931		(75	)		4,355
Total	$	177,025		11,211		(1,938	)		186,298
December 31, 2010
Securities of U.S. Treasury and federal agencies	$	1,570		49		(15	)		1,604
Securities of U.S. states and political subdivisions		18,923		568		(837	)		18,654
Mortgage-backed securities:
Federal agencies		78,578		3,555		(96	)		82,037
Residential		18,294		2,398		(489	)		20,203
Commercial		12,990		1,199		(635	)		13,554
Total mortgage-backed securities		109,862		7,152		(1,220	)		115,794
Corporate debt securities		9,015		1,301		(37	)		10,279
Collateralized debt obligations (1)		4,638		369		(229	)		4,778
Other (2)		16,063		576		(283	)		16,356
Total debt securities		160,071		10,015		(2,621	)		167,465
Marketable equity securities:
Perpetual preferred securities		3,671		250		(89	)		3,832
Other marketable equity securities		587		771		(1	)		1,357
Total marketable equity securities		4,258		1,021		(90	)		5,189
Total	$	164,329		11,036		(2,711	)		172,654

(1)

Includes collateralized loan obligations with a cost basis and fair value of $6.3 billion and $6.6 billion, respectively, at June 30, 2011, and $4.0 billion and $4.2 billion, respectively, at December 31, 2010.

(2)

Included in the “Other” category are asset-backed securities collateralized by auto leases or loans and cash reserves with a cost basis and fair value of $4.0 billion and $4.0 billion, respectively, at June 30, 2011, and $6.2 billion and $6.4 billion, respectively, at December 31, 2010. Also included in the “Other” category are asset-backed securities collateralized by home equity loans with a cost basis and fair value of $1.3 billion and $1.4 billion, respectively, at June 30, 2011, and $927 million and $1.1 billion, respectively, at December 31, 2010. The remaining balances primarily include asset-backed securities collateralized by credit cards and student loans.

Gross Unrealized Losses and Fair Value

The following table shows the gross unrealized losses and fair value of securities in the securities available-for-sale portfolio by length of time that individual securities in each category had been in a continuous loss position. Debt securities on which we have taken only credit-related OTTI write-downs are categorized as being “less than 12 months” or “12 months or more” in a continuous loss position based on the point in time that the fair value declined to below the cost basis and not the period of time since the credit-related OTTI write-down.

	Less than 12 months					12 months or more					Total
	Gross					Gross					Gross
	unrealized			Fair		unrealized			Fair		unrealized			Fair
(in millions)	losses			value		losses			value		losses			value
June 30, 2011
Securities of U.S. Treasury and federal agencies	$	(13	)		7,267		-			-		(13	)		7,267
Securities of U.S. states and political subdivisions		(124	)		5,237		(439	)		3,576		(563	)		8,813
Mortgage-backed securities:
Federal agencies		(19	)		4,045		(7	)		676		(26	)		4,721
Residential		(39	)		1,751		(279	)		3,571		(318	)		5,322
Commercial		(39	)		1,342		(457	)		3,936		(496	)		5,278
Total mortgage-backed securities		(97	)		7,138		(743	)		8,183		(840	)		15,321
Corporate debt securities		(16	)		1,291		(59	)		227		(75	)		1,518
Collateralized debt obligations		(25	)		1,933		(161	)		501		(186	)		2,434
Other		(18	)		2,124		(168	)		659		(186	)		2,783
Total debt securities		(293	)		24,990		(1,570	)		13,146		(1,863	)		38,136
Marketable equity securities:
Perpetual preferred securities		(5	)		303		(67	)		817		(72	)		1,120
Other marketable equity securities		(3	)		25		-			-		(3	)		25
Total marketable equity securities		(8	)		328		(67	)		817		(75	)		1,145
Total	$	(301	)		25,318		(1,637	)		13,963		(1,938	)		39,281
December 31, 2010
Securities of U.S. Treasury and federal agencies	$	(15	)		544		-			-		(15	)		544
Securities of U.S. states and political subdivisions		(322	)		6,242		(515	)		2,720		(837	)		8,962
Mortgage-backed securities:
Federal agencies		(95	)		8,103		(1	)		60		(96	)		8,163
Residential		(35	)		1,023		(454	)		4,440		(489	)		5,463
Commercial		(9	)		441		(626	)		5,141		(635	)		5,582
Total mortgage-backed securities		(139	)		9,567		(1,081	)		9,641		(1,220	)		19,208
Corporate debt securities		(10	)		477		(27	)		157		(37	)		634
Collateralized debt obligations		(13	)		679		(216	)		456		(229	)		1,135
Other		(13	)		1,985		(270	)		757		(283	)		2,742
Total debt securities		(512	)		19,494		(2,109	)		13,731		(2,621	)		33,225
Marketable equity securities:
Perpetual preferred securities		(41	)		962		(48	)		467		(89	)		1,429
Other marketable equity securities		-			-		(1	)		7		(1	)		7
Total marketable equity securities		(41	)		962		(49	)		474		(90	)		1,436
Total	$	(553	)		20,456		(2,158	)		14,205		(2,711	)		34,661

We do not have the intent to sell any securities included in the previous table. For debt securities included in the table, we have concluded it is more likely than not that we will not be required to sell prior to recovery of the amortized cost basis. We have assessed each security for credit impairment. For debt securities, we evaluate, where necessary, whether credit impairment exists by comparing the present value of the expected cash flows to the securities’ amortized cost basis. For equity securities, we consider numerous factors in determining whether impairment exists, including our intent and ability to hold the securities for a period of time sufficient to recover the cost basis of the securities.

     For complete descriptions of the factors we consider when analyzing debt securities for impairment, see Note 5 in our 2010 Form 10-K. There have been no material changes to our methodologies for assessing impairment in the first half of 2011.

SECURITIES OF U.S. TREASURY AND FEDERAL AGENCIES AND FEDERAL AGENCY MORTGAGE-BACKED SECURITIES (MBS)

The unrealized losses associated with U.S. Treasury and federal agency securities and federal agency MBS are primarily driven by changes in interest rates and not due to credit losses given the explicit or implicit guarantees provided by the U.S. government.

SECURITIES OF U.S. STATES AND POLITICAL SUBDIVISIONS
The unrealized losses associated with securities of U.S. states and political subdivisions are primarily driven by changes in interest rates and not due to the credit quality of the securities. Substantially all of these investments are investment grade. The securities were generally underwritten in accordance with our own investment standards prior to the decision to purchase, without relying on a bond insurer’s guarantee in making the investment decision. These investments will continue to be monitored as part of our ongoing impairment analysis, but are expected to perform, even if the rating agencies reduce the credit rating of the bond insurers. As a result, we expect to recover the entire amortized cost basis of these securities.

RESIDENTIAL AND COMMERCIAL MORTGAGE-BACKED SECURITIES (MBS) The unrealized losses associated with private residential MBS and commercial MBS are primarily driven by changes in projected collateral losses, credit spreads and interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. We estimate losses to a security by forecasting the underlying mortgage loans in each transaction. We use forecasted loan performance to project cash flows to the various tranches in the structure. We also consider cash flow forecasts and, as applicable, independent industry analyst reports and forecasts, sector credit ratings, and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

CORPORATE DEBT SECURITIES The unrealized losses associated with corporate debt securities are primarily related to unsecured debt obligations issued by various corporations. We evaluate the financial performance of each issuer on a quarterly basis to determine that the issuer can make all contractual principal and interest payments. Based upon this assessment, we expect to recover the entire amortized cost basis of these securities.

COLLATERALIZED DEBT OBLIGATIONS (CDOs) The unrealized losses associated with CDOs relate to securities primarily backed by commercial, residential or other consumer collateral. The losses are primarily driven by changes in projected collateral losses, credit spreads and interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. We also consider cash flow forecasts and, as applicable, independent industry analyst reports and forecasts, sector credit ratings, and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

OTHER DEBT SECURITIES The unrealized losses associated with other debt securities primarily relate to other asset-backed securities. The losses are primarily driven by changes in projected collateral losses, credit spreads and interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

MARKETABLE EQUITY SECURITIES Our marketable equity securities include investments in perpetual preferred securities, which provide very attractive tax-equivalent yields. We evaluated these hybrid financial instruments with investment-grade ratings for impairment using an evaluation methodology similar to that used for debt securities. Perpetual preferred securities are not considered to be other-than-temporarily impaired if there is no evidence of credit deterioration or investment rating downgrades of any issuers to below investment grade, and we expect to continue to receive full contractual payments. We will continue to evaluate the prospects for these securities for recovery in their market value in accordance with our policy for estimating OTTI. We have recorded impairment write-downs on perpetual preferred securities where there was evidence of credit deterioration.

     The fair values of our investment securities could decline in the future if the underlying performance of the collateral for the residential and commercial MBS or other securities deteriorate and our credit enhancement levels do not provide sufficient protection to our contractual principal and interest. As a result, there is a risk that significant OTTI may occur in the future.

     The following table shows the gross unrealized losses and fair value of debt and perpetual preferred securities available for sale by those rated investment grade and those rated less than investment grade, according to their lowest credit rating by Standard & Poor’s Rating Services (S&P) or Moody’s Investors Service (Moody’s). Credit ratings express opinions about the credit quality of a security. Securities rated investment grade, that is those rated BBB- or higher by S&P or Baa3 or higher by Moody’s, are generally considered by the rating agencies and market participants to be low credit risk. Conversely, securities rated below investment grade, labeled as “speculative grade” by the rating agencies, are considered to be distinctively higher credit risk than investment grade securities. We have also included securities not rated by S&P or Moody’s in the table below based on the internal credit grade of the securities (used for credit risk management purposes) equivalent to the credit rating assigned by major credit agencies. The unrealized losses and fair value of unrated securities categorized as investment grade based on internal credit grades were $190 million and $3.0 billion, respectively, at June 30, 2011, and $83 million and $1.3 billion, respectively, at December 31, 2010. If an internal credit grade was not assigned, we categorized the security as non-investment grade.

	Investment grade					Non-investment grade
	Gross					Gross
	unrealized			Fair		unrealized			Fair
(in millions)	losses			value		losses			value
June 30, 2011
Securities of U.S. Treasury and federal agencies	$	(13	)		7,267		-			-
Securities of U.S. states and political subdivisions		(467	)		8,340		(96	)		473
Mortgage-backed securities:
Federal agencies		(26	)		4,721		-			-
Residential		(14	)		544		(304	)		4,778
Commercial		(239	)		4,286		(257	)		992
Total mortgage-backed securities		(279	)		9,551		(561	)		5,770
Corporate debt securities		(18	)		839		(57	)		679
Collateralized debt obligations		(47	)		2,069		(139	)		365
Other		(164	)		2,522		(22	)		261
Total debt securities		(988	)		30,588		(875	)		7,548
Perpetual preferred securities		(69	)		1,002		(3	)		118
Total	$	(1,057	)		31,590		(878	)		7,666
December 31, 2010
Securities of U.S. Treasury and federal agencies	$	(15	)		544		-			-
Securities of U.S. states and political subdivisions		(722	)		8,423		(115	)		539
Mortgage-backed securities:
Federal agencies		(96	)		8,163		-			-
Residential		(23	)		888		(466	)		4,575
Commercial		(299	)		4,679		(336	)		903
Total mortgage-backed securities		(418	)		13,730		(802	)		5,478
Corporate debt securities		(22	)		330		(15	)		304
Collateralized debt obligations		(42	)		613		(187	)		522
Other		(180	)		2,510		(103	)		232
Total debt securities		(1,399	)		26,150		(1,222	)		7,075
Perpetual preferred securities		(81	)		1,327		(8	)		102
Total	$	(1,480	)		27,477		(1,230	)		7,177

Contractual Maturities

The following table shows the remaining contractual maturities and contractual yields of debt securities available for sale. The remaining contractual principal maturities for MBS do not consider prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.

						Remaining contractual maturity
			Weighted-								After one year					After five years
	Total		average			Within one year					through five years					through ten years					After ten years
(in millions)	amount		yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
June 30, 2011
Securities of U.S. Treasury and federal agencies	$	10,523		1.06	%	$	8		5.35	%	$	9,913		0.89	%	$	511		3.70	%	$	91		3.97	%
Securities of U.S. states and political subdivisions		24,412		5.35			501		3.49			5,065		2.88			2,075		5.60			16,771		6.12
Mortgage-backed securities:
Federal agencies		78,338		4.86			11		6.58			480		2.61			743		4.66			77,104		4.88
Residential		18,360		4.82			-		-			-		-			707		1.89			17,653		4.93
Commercial		14,728		5.48			-		-			1		1.55			194		5.69			14,533		5.48
Total mortgage-backed securities		111,426		4.94			11		6.58			481		2.60			1,644		3.59			109,290		4.97
Corporate debt securities		11,897		5.39			577		5.51			5,748		4.54			4,195		6.47			1,377		5.59
Collateralized debt obligations		7,232		0.81			-		-			527		0.87			4,787		0.70			1,918		1.06
Other		16,453		2.17			897		1.30			7,948		2.05			3,317		2.54			4,291		2.28
Total debt securities at fair value	$	181,943		4.38	%	$	1,994		3.11	%	$	29,682		2.27	%	$	16,529		3.53	%	$	133,738		4.97	%
December 31, 2010
Securities of U.S. Treasury and federal agencies	$	1,604		2.54	%	$	9		5.07	%	$	641		1.72	%	$	852		2.94	%	$	102		4.15	%
Securities of U.S. states and political subdivisions		18,654		5.99			322		3.83			3,210		3.57			1,884		6.13			13,238		6.60
Mortgage-backed securities:
Federal agencies		82,037		5.01			5		6.63			28		6.58			420		5.23			81,584		5.00
Residential		20,203		4.98			-		-			-		-			341		3.20			19,862		5.01
Commercial		13,554		5.39			-		-			1		1.38			215		5.28			13,338		5.39
Total mortgage-backed securities		115,794		5.05			5		6.63			29		6.38			976		4.53			114,784		5.05
Corporate debt securities		10,279		5.94			545		7.82			3,853		6.01			4,817		5.62			1,064		6.21
Collateralized debt obligations		4,778		0.80			-		-			545		0.88			2,581		0.72			1,652		0.90
Other		16,356		2.53			1,588		2.89			7,887		3.00			4,367		2.01			2,514		1.72
Total debt securities at fair value	$	167,465		4.81	%	$	2,469		4.12	%	$	16,165		3.72	%	$	15,477		3.63	%	$	133,354		5.10	%

Realized Gains and Losses

The following table shows the gross realized gains and losses on sales and OTTI write-downs related to the securities available-for-sale portfolio, which includes marketable equity securities, as well as net realized gains and losses on nonmarketable equity securities (see Note 6 — Other Assets).

	Quarter ended June 30,						Six months ended June 30,
(in millions)	2011			2010			2011			2010
Gross realized gains	$	430			260			500			444
Gross realized losses		(7	)		(3	)		(49	)		(18	)
OTTI write-downs		(189	)		(106	)		(269	)		(212	)
Net realized gains from securities available for sale		234			151			182			214
Net realized gains from principal and private equity investments		362			167			601			175
Net realized gains from debt securities and equity investments	$	596			318			783			389

Other-Than-Temporary Impairment

The following table shows the detail of total OTTI write-downs included in earnings for debt securities and marketable and nonmarketable equity securities.

	Quarter ended June 30,				Six months ended June 30,
(in millions)	2011		2010		2011		2010
OTTI write-downs included in earnings
Debt securities:
U.S. states and political subdivisions	$	2		3		2		8
Mortgage-backed securities:
Residential		144		37		206		76
Commercial		9		42		23		55
Corporate debt securities		-		4		-		5
Collateralized debt obligations		-		5		-		11
Other debt securities		34		15		38		43
Total debt securities		189		106		269		198
Equity securities:
Marketable equity securities:
Perpetual preferred securities		-		-		-		14
Total marketable equity securities		-		-		-		14
Total securities available for sale		189		106		269		212
Nonmarketable equity securities		16		62		57		153
Total OTTI write-downs included in earnings	$	205		168		326		365

Other-Than-Temporarily Impaired Debt Securities

The following table shows the detail of OTTI write-downs on debt securities available for sale included in earnings and the related changes in OCI for the same securities.

	Quarter ended June 30,						Six months ended June 30,
(in millions)	2011			2010			2011			2010
OTTI on debt securities
Recorded as part of gross realized losses:
Credit-related OTTI	$	189			106			268			195
Intent-to-sell OTTI		-			-			1			3
Total recorded as part of gross realized losses		189			106			269			198
Recorded directly to OCI for non-credit-related impairment:
U.S. states and political subdivisions		(1	)		(1	)		(1	)		(5	)
Residential mortgage-backed securities		(64	)		(124	)		(168	)		(98	)
Commercial mortgage-backed securities		17			84			(36	)		82
Collateralized debt obligations		-			(3	)		-			56
Other debt securities		(12	)		(13	)		(11	)		(30	)
Total recorded directly to OCI for increase (decrease) in non-credit-related impairment (1)		(60	)		(57	)		(216	)		5
Total OTTI losses recorded on debt securities	$	129			49			53			203

(1) Represents amounts recorded to OCI on debt securities in periods OTTI write-downs have occurred. Changes in fair value in subsequent periods on such securities, to the extent additional credit-related OTTI did not occur, are not reflected in this total. For the quarter ended June 30, 2011, the non-credit-related impairment recorded to OCI was a $60 million reduction in total OTTI because the fair value of the security increased due to factors other than credit. This fair value increase (net of the $189 million decrease related to credit) was not sufficient to recover the full amount of the unrealized loss on such securities and therefore required recognition of OTTI.

The following table presents a rollforward of the credit loss component recognized in earnings for debt securities we still own (referred to as “credit-impaired” debt securities). The credit loss component of the amortized cost represents the difference between the present value of expected future cash flows and the amortized cost basis of the security prior to considering credit losses. OTTI recognized in earnings for credit-impaired debt securities is presented as additions in two components based upon whether the current period is the first time the debt security was credit-impaired (initial credit impairment) or is not the first time the debt security was credit-impaired (subsequent credit impairments). The credit loss component is reduced if we sell, intend to sell or believe we will be required to sell previously credit-impaired debt securities. Additionally, the credit loss component is reduced if we receive or expect to receive cash flows in excess of what we previously expected to receive over the remaining life of the credit-impaired debt security, the security matures or is fully written down.

     Changes in the credit loss component of credit-impaired debt securities that we do not intend to sell were:

	Quarter ended June 30,						Six months ended June 30,
(in millions)	2011			2010			2011			2010
Credit loss component, beginning of period	$	1,087			1,002			1,043			1,187
Additions:
Initial credit impairments		31			39			42			59
Subsequent credit impairments		158			67			226			136
Total additions		189			106			268			195
Reductions:
For securities sold		(15	)		(51	)		(38	)		(76	)
For securities derecognized resulting from adoption of consolidation accounting guidance		-			-			-			(242	)
Due to change in intent to sell or requirement to sell		-			(2	)		-			(2	)
For recoveries of previous credit impairments (1)		(10	)		(6	)		(22	)		(13	)
Total reductions		(25	)		(59	)		(60	)		(333	)
Credit loss component, end of period	$	1,251			1,049			1,251			1,049

(1) Recoveries of previous credit impairments result from increases in expected cash flows subsequent to credit loss recognition. Such recoveries are reflected prospectively as interest yield adjustments using the effective interest method.

For asset-backed securities (e.g., residential MBS), we estimated expected future cash flows of the security by estimating the expected future cash flows of the underlying collateral and applying those collateral cash flows, together with any credit enhancements such as subordinated interests owned by third parties, to the security. The expected future cash flows of the underlying collateral are determined using the remaining contractual cash flows adjusted for future expected credit losses (which consider current delinquencies and nonperforming assets (NPAs), future expected default rates and collateral value by vintage and geographic region) and prepayments. The expected cash flows of the security are then discounted at the interest rate used to recognize interest income on the security to arrive at a present value amount. Total credit impairment losses on residential MBS that we do not intend to sell are shown in the table below. The table also presents a summary of the significant inputs considered in determining the measurement of the credit loss component recognized in earnings for residential MBS.

	Quarter ended June 30,					Six months ended June 30,
($ in millions)	2011			2010		2011		2010
Credit impairment losses on residential MBS
Investment grade	$	-			-		5		-
Non-investment grade		144			37		201		76
Total credit impairment losses on residential MBS	$	144			37		206		76
Significant inputs (non-agency — non-investment grade MBS)
Expected remaining life of loan losses (1):
Range (2)		0-40	%		1-40		0-40		1-40
Credit impairment distribution (3):
0 - 10% range		40			54		45		53
10 - 20% range		13			8		16		14
20 - 30% range		35			34		30		29
Greater than 30%		12			4		9		4
Weighted average (4)		12			8		11		9
Current subordination levels (5):
Range (2)		0-13			0-25		0-13		0-25
Weighted average (4)		4			7		5		7
Prepayment speed (annual CPR (6)):
Range (2)		5-14			3-17		5-15		3-17
Weighted average (4)		11			9		11		9

(1)	Represents future expected credit losses on underlying pool of loans expressed as a percentage of total current outstanding loan balance.
(2)	Represents the range of inputs/assumptions based upon the individual securities within each category.
(3)	Represents distribution of credit impairment losses recognized in earnings categorized based on range of expected remaining life of loan losses. For example 40% of credit impairment losses recognized in earnings for the quarter ended June 30, 2011, had expected remaining life of loan loss assumptions of 0 to 10%.
(4)	Calculated by weighting the relevant input/assumption for each individual security by current outstanding amortized cost basis of the security.
(5)	Represents current level of credit protection (subordination) for the securities, expressed as a percentage of total current underlying loan balance.
(6)	Constant prepayment rate.