Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Carrying Value and Estimated Fair Value of Financial Instruments

The following table summarizes the carrying value and estimated fair value of our financial instruments at September 30, 2014 and December 31, 2013:



September 30, 2014	Carrying Value		Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Short-term financial assets	$	27,443	$	27,443	$	1,013	$	26,379	$	51
Federal funds sold and securities purchased under resale agreements	1,096		1,096		—		1,096		—
Non-derivative trading assets	17,453		17,453		1,958		12,397		3,098
Derivatives	6,094		6,094		22		6,029		43
Securities	41,934		42,022		21,744		20,278		—
Commercial loans, net of allowance for credit losses	53,650		55,333		—		—		55,333
Commercial loans designated under fair value option and held for sale	69		69		—		69		—
Commercial loans held for sale	154		154		—		154		—
Consumer loans, net of allowance for credit losses	19,158		17,311		—		—		17,311
Consumer loans held for sale:
Residential mortgages	38		38		—		17		21
Other consumer	66		66		—		—		66
Financial liabilities:
Short-term financial liabilities	$	11,933	$	11,933	$	—	$	11,882	$	51
Deposits:
Without fixed maturities	98,939		98,939		—		98,939		—
Fixed maturities	2,201		2,204		—		2,204		—
Deposits designated under fair value option	7,537		7,537		—		5,632		1,905
Non-derivative trading liabilities	3,625		3,625		412		3,213		—
Derivatives	6,332		6,332		5		6,305		22
Long-term debt	16,338		16,919		—		16,919		—
Long-term debt designated under fair value option	8,696		8,696		—		8,064		632



December 31, 2013	Carrying Value		Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Short-term financial assets	$	20,626	$	20,626	$	961	$	19,614	$	51
Federal funds sold and securities purchased under resale agreements	2,119		2,119		—		2,119		—
Non-derivative trading assets	22,903		22,903		1,344		18,924		2,635
Derivatives	7,569		7,569		26		7,467		76
Securities	56,368		56,405		39,553		16,852		—
Commercial loans, net of allowance for credit losses	48,186		49,897		—		—		49,897
Commercial loans designated under fair value option and held for sale	58		58		—		58		—
Commercial loans held for sale	18		18		—		18		—
Consumer loans, net of allowance for credit losses	18,903		16,051		—		—		16,051
Consumer loans held for sale:
Residential mortgages	91		92		—		36		56
Other consumer	63		63		—		—		63
Financial liabilities:
Short-term financial liabilities	$	19,205	$	19,205	$	—	$	19,154	$	51
Deposits:
Without fixed maturities	102,584		102,584		—		102,584		—
Fixed maturities	2,284		2,289		—		2,289		—
Deposits designated under fair value option	7,740		7,740		—		5,406		2,334
Non-derivative trading liabilities	4,134		4,134		308		3,826		—
Derivatives	7,348		7,348		5		7,294		49
Long-term debt	15,261		15,729		—		15,729		—
Long-term debt designated under fair value option	7,586		7,586		—		6,686		900

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following table presents information about our assets and liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value:



	Fair Value Measurements on a Recurring Basis
September 30, 2014	Level 1		Level 2		Level 3		Gross Balance		Netting⁽¹⁾			Net Balance
	(in millions)
Assets:
Trading Securities, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	$	1,958	$	97	$	—	$	2,055	$	—		$	2,055
Obligations of U.S. States and political subdivisions	—		611		—		611		—			611
Collateralized debt obligations	—		—		269		269		—			269
Asset-backed securities:
Residential mortgages	—		149		—		149		—			149
Student Loans	—		84		—		84		—			84
Corporate and other domestic debt securities	—		—		2,829		2,829		—			2,829
Debt Securities issued by foreign entities:
Corporate	—		274		—		274		—			274
Government-backed	—		3,162		—		3,162		—			3,162
Equity securities	—		22		—		22		—			22
Precious metals trading	—		7,998		—		7,998		—			7,998
Derivatives⁽²⁾:
Interest rate contracts	39		40,658		4		40,701		—			40,701
Foreign exchange contracts	—		18,046		13		18,059		—			18,059
Equity contracts	—		1,995		131		2,126		—			2,126
Precious metals contracts	203		1,306		—		1,509		—			1,509
Credit contracts	—		3,989		318		4,307		—			4,307
Derivatives netting	—		—		—		—		(60,608		)	(60,608		)
Total derivatives	242		65,994		466		66,702		(60,608		)	6,094
Securities available-for-sale:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	21,744		2,609		—		24,353		—			24,353
Obligations of U.S. states and political subdivisions	—		706		—		706		—			706
Asset-backed securities:
Residential mortgages	—		1		—		1		—			1
Commercial mortgages	—		60		—		60		—			60
Home equity	—		92		—		92		—			92
Other	—		95		—		95		—			95
Debt Securities issued by foreign entities:
Corporate	—		859		—		859		—			859
Government-backed	—		3,470		—		3,470		—			3,470
Equity securities	—		165		—		165		—			165
Loans⁽³⁾	—		69		—		69		—			69
Mortgage servicing rights⁽⁴⁾	—		—		182		182		—			182
Total assets	$	23,944	$	86,517	$	3,746	$	114,207	$	(60,608	)	$	53,599
Liabilities:
Deposits in domestic offices⁽⁵⁾	$	—	$	5,632	$	1,905	$	7,537	$	—		$	7,537
Trading liabilities, excluding derivatives	412		3,213		—		3,625		—			3,625
Derivatives⁽²⁾:
Interest rate contracts	33		41,057		—		41,090		—			41,090
Foreign exchange contracts	9		17,172		16		17,197		—			17,197
Equity contracts	—		1,492		118		1,610		—			1,610
Precious metals contracts	5		784		—		789		—			789
Credit contracts	—		4,123		97		4,220		—			4,220
Derivatives netting	—		—		—		—		(58,574		)	(58,574		)
Total derivatives	47		64,628		231		64,906		(58,574		)	6,332
Long-term debt⁽⁶⁾	—		8,064		632		8,696		—			8,696
Total liabilities	$	459	$	81,537	$	2,768	$	84,764	$	(58,574	)	$	26,190



	Fair Value Measurements on a Recurring Basis
December 31, 2013	Level 1		Level 2		Level 3		Gross Balance		Netting⁽¹⁾			Net Balance
	(in millions)
Assets:
Trading Securities, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	$	1,344	$	178	$	—	$	1,522	$	—		$	1,522
Obligations of U. S. States and political subdivisions	—		25		—		25		—			25
Collateralized debt obligations	—		—		254		254		—			254
Asset-backed securities:
Residential mortgages	—		159		—		159		—			159
Student loans	—		68		—		68		—			68
Corporate and other domestic debt securities	—		—		2,260		2,260		—			2,260
Debt Securities issued by foreign entities:
Corporate	—		495		—		495		—			495
Government-backed	—		6,223		121		6,344		—			6,344
Equity securities	—		25		—		25		—			25
Precious metals trading	—		11,751		—		11,751		—			11,751
Derivatives⁽²⁾:
Interest rate contracts	81		56,095		1		56,177		—			56,177
Foreign exchange contracts	7		15,291		131		15,429		—			15,429
Equity contracts	—		2,042		160		2,202		—			2,202
Precious metals contracts	182		1,400		1		1,583		—			1,583
Credit contracts	—		4,152		512		4,664		—			4,664
Derivatives netting	—		—		—		—		(72,486		)	(72,486		)
Total derivatives	270		78,980		805		80,055		(72,486		)	7,569
Securities available-for-sale:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	39,513		9,439		—		48,952		—			48,952
Obligations of U.S. states and political subdivisions	—		742		—		742		—			742
Asset-backed securities:
Residential mortgages	—		1		—		1		—			1
Commercial mortgages	—		126		—		126		—			126
Home equity	—		227		—		227		—			227
Other	—		94		—		94		—			94
Debt Securities issued by foreign entities:
Corporate	—		881		—		881		—			881
Government-backed	40		3,681		—		3,721		—			3,721
Equity securities	—		162		—		162		—			162
Loans⁽³⁾	—		58		—		58		—			58
Mortgage servicing rights⁽⁴⁾	—		—		227		227		—			227
Total assets	$	41,167	$	113,315	$	3,667	$	158,149	$	(72,486	)	$	85,663
Liabilities:
Deposits in domestic offices⁽⁵⁾	$	—	$	5,406	$	2,334	$	7,740	$	—		$	7,740
Trading liabilities, excluding derivatives	308		3,826		—		4,134		—			4,134
Derivatives⁽²⁾:
Interest rate contracts	34		56,282		—		56,316		—			56,316
Foreign exchange contracts	16		14,576		36		14,628		—			14,628
Equity contracts	—		1,403		157		1,560		—			1,560
Precious metals contracts	7		847		3		857		—			857
Credit contracts	—		4,398		321		4,719		—			4,719
Derivatives netting	—		—		—		—		(70,732		)	(70,732		)
Total derivatives	57		77,506		517		78,080		(70,732		)	7,348
Long-term debt⁽⁶⁾	—		6,686		900		7,586		—			7,586
Total liabilities	$	365	$	93,424	$	3,751	$	97,540	$	(70,732	)	$	26,808


⁽¹⁾	Represents counterparty and cash collateral netting which allow the offsetting of amounts relating to certain contracts if certain conditions are met.


⁽²⁾	Includes trading derivative assets of $4,646 million and $5,991 million and trading derivative liabilities of $5,552 million and $6,741 million as of September 30, 2014 and December 31, 2013, respectively, as well as derivatives held for hedging and commitments accounted for as derivatives.


⁽³⁾	Includes certain commercial loans held for sale which we have elected to apply the fair value option. See Note 6, "Loans Held for Sale," for further information.


⁽⁴⁾	See Note 7, "Intangible Assets," for additional information.


⁽⁵⁾	Represents structured deposits risk-managed on a fair value basis for which we have elected to apply the fair value option.


⁽⁶⁾	Includes structured notes and own debt issuances which we have elected to measure on a fair value basis.

Changes in Fair Value of Level 3 Assets and Liabilities

The following table summarizes additional information about changes in the fair value of Level 3 assets and liabilities during the three and nine months ended September 30, 2014 and 2013. As a risk management practice, we may risk manage the Level 3 assets and liabilities, in whole or in part, using securities and derivative positions that are classified as Level 1 or Level 2 measurements within the fair value hierarchy. Since those Level 1 and Level 2 risk management positions are not included in the table below, the information provided does not reflect the effect of such risk management activities related to the Level 3 assets and liabilities.



	Jul. 1, 2014			Total Gains and (Losses) Included in⁽¹⁾					Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2014			Current Period Unrealized Gains (Losses)
	Jul. 1, 2014			Trading Revenue (Loss)			Other Revenue		Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2014			Current Period Unrealized Gains (Losses)
	(in millions)
Assets:
Trading assets, excluding derivatives:
Collateralized debt obligations	$	260		$	20		$	—	$	—	$	—		$	(11	)	$	—		$	—		$	269		$	19
Corporate and other domestic debt securities	2,819			—			—		10		—			—			—			—			2,829			—
Government debt securities issued by foreign entities	—			—			—		—		—			—			—			—			—			—
Derivatives, net⁽²⁾:
Interest rate contracts	—			4			—		—		—			—			—			—			4			3
Foreign exchange contracts				(3		)	—		—		—			—			—			—			(3		)	(3		)
Equity contracts	59			(21		)	—		—		—			(23		)	(1		)	(1		)	13			(32		)
Precious metals contracts	—			—			—		—		—			—			—			—			—			—
Credit contracts	257			(31		)	—		—		—			(5		)	—			—			221			(36		)
Mortgage servicing rights⁽³⁾	186			—			2		—		—			(6		)	—			—			182			2
Total assets	$	3,581		$	(31	)	$	2	$	10	$	—		$	(45	)	$	(1	)	$	(1	)	$	3,515		$	(47	)
Liabilities:
Deposits in domestic offices	$	(2,257	)	$	(2	)	$	—	$	—	$	(111	)	$	129		$	(59	)	$	395		(1,905		)	$	26
Long-term debt	(738		)	27			—		—		(82		)	82			(2		)	81			(632		)	9
Total liabilities	$	(2,995	)	$	25		$	—	$	—	$	(193	)	$	211		$	(61	)	$	476		$	(2,537	)	$	35



	Jan. 1, 2014			Total Gains and (Losses) Included in⁽¹⁾						Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2014			Current Period Unrealized Gains (Losses)
	Jan. 1, 2014			Trading Revenue (Loss)			Other Revenue			Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2014			Current Period Unrealized Gains (Losses)
	(in millions)
Assets:
Trading assets, excluding derivatives:
Collateralized debt obligations	$	254		$	34		$	—		$	—	$	—		$	(19	)	$	—		$	—		$	269		$	31
Corporate and other domestic debt securities	2,260			(5		)	—			574		—			—			—			—			2,829			(4		)
Government debt securities issued by foreign entities	121			5			—			—		—			(7		)	—			(119		)	—			—
Derivatives, net⁽²⁾:
Interest rate contracts	1			3			—			—		—			—			—			—			4			3
Foreign exchange contracts	95			7			—			—		—			(12		)	—			(93		)	(3		)	(1		)
Equity contracts	3			65			—			—		—			(59		)	7			(3		)	13			8
Precious metals contracts	(2		)	2			—			—		—			—			—			—			—			—
Credit contracts	191			(86		)	—			—		—			2			—			114			221			(134		)
Mortgage servicing rights⁽³⁾	227			—			(22		)	—		—			(23		)	—			—			182			(22		)
Total assets	$	3,150		$	25		$	(22	)	$	574	$	—		$	(118	)	$	7		$	(101	)	$	3,515		$	(119	)
Liabilities:
Deposits in domestic offices	$	(2,334	)	$	(211	)	$	—		$	—	$	(271	)	$	428		$	(108	)	$	591		(1,905		)	$	(10	)
Long-term debt	(900		)	121			—			—		(234		)	202			(2		)	181			(632		)	(15		)
Total liabilities	$	(3,234	)	$	(90	)	$	—		$	—	$	(505	)	$	630		$	(110	)	$	772		$	(2,537	)	$	(25	)



	Jul. 1, 2013			Total Gains and (Losses) Included in⁽¹⁾						Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2013			Current Period Unrealized Gains (Losses)
	Jul. 1, 2013			Trading Revenue (Loss)			Other Revenue			Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2013			Current Period Unrealized Gains (Losses)
	(in millions)
Assets:
Trading assets, excluding derivatives:
Collateralized debt obligations	$	227		$	21		$	—		$	—	$	—		$	(3	)	$	—		$	—		$	245		$	20
Corporate and other domestic debt securities	1,498			—			—			15		—			—			—			—			1,513			—
Corporate debt securities issued by foreign entities	285			6			—			—		—			(99		)	—			—			192			6
Government debt securities issued by foreign entities	135			(7		)	—			—		—			(7		)	—			—			121			(8		)
Equity securities	—			—			—			—		—			—			—			—			—			—
Derivatives, net⁽²⁾:
Interest rate contracts	(1		)	—			2			—		—			—			—			—			1			2
Foreign exchange contracts	104			6			—			—		—			(6		)	1			—			105			—
Equity contracts	(83		)	50			—			—		—			(5		)	4			(4		)	(38		)	47
Precious metals contracts	—			(1		)	—			—		—			—			—			—			(1		)	(1		)
Credit contracts	225			(26		)	—			—		—			14			—			—			213			(18		)
Mortgage servicing rights⁽³⁾	225			—			(1		)	—		—			—			—			—			224			(1		)
Total assets	$	2,615		$	49		$	1		$	15	$	—		$	(106	)	$	5		$	(4	)	$	2,575		$	47
Liabilities:
Deposits in domestic offices	$	(2,448	)	$	(33	)	$	—		$	—	$	(73	)	$	85		$	(84	)	$	79		(2,474		)	$	(18	)
Long-term debt	(672		)	(9		)	—			—		(156		)	83			(25		)	24			(755		)	(18		)
Total liabilities	$	(3,120	)	$	(42	)	$	—		$	—	$	(229	)	$	168		$	(109	)	$	103		$	(3,229	)	$	(36	)



	Jan. 1, 2013			Total Gains and (Losses) Included in⁽¹⁾						Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2013			Current Period Unrealized Gains (Losses)
	Jan. 1, 2013			Trading Revenue (Loss)			Other Revenue			Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2013			Current Period Unrealized Gains (Losses)
	(in millions)
Assets:
Trading assets, excluding derivatives:
Collateralized debt obligations	$	466		$	139		$	—		$	236	$	—		$	(596	)	$	—		$	—		$	245		$	137
Corporate and other domestic debt securities	1,861			28			—			46		—			(422		)	—			—			1,513			28
Corporate debt securities issued by foreign entities	299			(8		)	—			—		—			(99		)	—			—			192			(8		)
Government debt securities issued by foreign entities	311			14			—			—		—			(204		)	—			—			121			2
Equity securities	9			(5		)	—			—		—			(4		)	—			—			—			(5		)
Derivatives, net⁽²⁾:
Interest rate contracts	7			—			(6		)	—		—			—			—			—			1			(7		)
Foreign exchange contracts	5			2			—			—		—			110			(12		)	—			105			107
Equity contracts	(7		)	30			—			—		—			(52		)	16			(25		)	(38		)	(28		)
Precious metals contracts	—			(1		)	—			—		—			—			—			—			(1		)	(1		)
Credit contracts	571			(186		)	—			—		—			(126		)	(46		)	—			213			(287		)
Mortgage servicing rights⁽³⁾	168			—			45			—		11			—			—			—			224			45
Total assets	$	3,690		$	13		$	39		$	282	$	11		$	(1,393	)	$	(42	)	$	(25	)	$	2,575		$	(17	)
Liabilities:
Deposits in domestic offices	$	(2,635	)	$	333		$	—		$	—	$	(558	)	$	304		$	(241	)	$	323		(2,474		)	$	133
Long-term debt	(429		)	(268		)	—			—		(425		)	188			(25		)	204			(755		)	(228		)
Total liabilities	$	(3,064	)	$	65		$	—		$	—	$	(983	)	$	492		$	(266	)	$	527		$	(3,229	)	$	(95	)


⁽¹⁾	Includes realized and unrealized gains and losses.


⁽²⁾	Level 3 net derivatives included derivative assets of $466 million and derivative liabilities of $231 million as of September 30, 2014 and derivative assets of $897 million and derivative liabilities of $618 million as of September 30, 2013.


⁽³⁾	See Note 7, "Intangible Assets," for additional information.

Quantitative Information about Recurring Fair Value Measurement of Assets and Liabilities Classified as Level 3

The following table presents quantitative information about the unobservable inputs used to determine the recurring fair value measurement of assets and liabilities classified as Level 3 fair value measurements as of September 30, 2014 and December 31, 2013:



September 30, 2014
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs
Collateralized debt obligations	269		Broker quotes or consensus pricing and, where applicable, discounted cash flows	Prepayment rates	1% - 6%
				Conditional default rates	6% - 12%
				Loss severity rates	90% - 91%
Corporate and other domestic debt securities	2,829		Discounted cash flows	Spread volatility on collateral assets	1% - 3%
				Correlation between insurance claim shortfall and collateral value	80%
Interest rate derivative contracts	4		Market comparable adjusted for probability to fund	Probability to fund for rate lock commitments	5% - 98%
				Probability to fund for deal contingent swaps	90% - 100%
Foreign exchange derivative contracts⁽¹⁾	(3	)	Option pricing model	Implied volatility of currency pairs	13% - 18%
Equity derivative contracts⁽¹⁾	13		Option pricing model	Equity / Equity Index volatility	8% - 48%
				Equity / Equity and Equity / Index correlation	47% - 73%
Credit derivative contracts	221		Option pricing model	Correlation of defaults of a portfolio of reference credit names	51% - 62%
				Issuer by issuer correlation of defaults	82% - 83%
Mortgage servicing rights	182		Option adjusted discounted cash flows	Constant prepayment rates	8% - 45%
				Option adjusted spread	8% - 19%
				Estimated annualized costs to service	$91 - $333 per account
Deposits in domestic offices (structured deposits)⁽¹⁾⁽²⁾	(1,905	)	Option adjusted discounted cash flows	Implied volatility of currency pairs	13% - 18%
				Equity / Equity Index volatility	8% - 48%
				Equity / Equity and Equity / Index correlation	47% - 73%
Long-term debt (structured notes)⁽¹⁾⁽²⁾	(632	)	Option adjusted discounted cash flows	Implied volatility of currency pairs	13% - 18%
				Equity / Equity Index volatility	8% - 48%
				Equity / Equity and Equity / Index correlation	47% - 73%



December 31, 2013
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs
Collateralized debt obligations	254		Broker quotes or consensus pricing and, where applicable, discounted cash flows	Prepayment rates	0% - 5%
				Conditional default rates	5% - 7%
				Loss severity rates	90% - 100%
Corporate and other domestic debt securities	2,260		Discounted cash flows	Spread volatility on collateral assets	1% - 3%
				Correlation between insurance claim shortfall and collateral value	80%
Government debt securities issued by foreign entities	121		Discounted cash flows	Correlations of default among a portfolio of credit names of embedded credit derivatives	36% - 63%
Interest rate derivative contracts	1		Market comparable adjusted for probability to fund	Probability to fund for rate lock commitments	10% - 99%
Foreign exchange derivative contracts⁽¹⁾	95		Option pricing model	Implied volatility of currency pairs	11% - 16%
Equity derivative contracts⁽¹⁾	3		Option pricing model	Equity / Equity Index volatility	6% - 69%
				Equity / Equity and Equity / Index correlation	50% - 58%
Credit derivative contracts	191		Option pricing model	Correlation of defaults of a portfolio of reference credit names	46% - 54%
				Issuer by issuer correlation of defaults	83% - 95%
Mortgage servicing rights	227		Option adjusted discounted cash flows	Constant prepayment rates	5% - 22%
				Option adjusted spread	8% - 19%
				Estimated annualized costs to service	$91 - $333 per account
Deposits in domestic offices (structured deposits)⁽¹⁾⁽²⁾	(2,334	)	Option adjusted discounted cash flows	Implied volatility of currency pairs	11% - 16%
				Equity / Equity Index volatility	6% - 69%
				Equity / Equity and Equity / Index correlation	50% - 58%
Long-term debt (structured notes)⁽¹⁾⁽²⁾	(900	)	Option adjusted discounted cash flows	Implied volatility of currency pairs	11% - 16%
				Equity / Equity Index volatility	6% - 69%
				Equity / Equity and Equity / Index correlation	50% - 58%


⁽¹⁾	We are the client-facing entity and we enter into identical but opposite derivatives to transfer the resultant risks to our affiliates. With the exception of counterparty credit risks, we are market neutral. The corresponding intra-group derivatives are presented as equity derivatives and foreign exchange derivatives in the table.


⁽²⁾	Structured deposits and structured notes contain embedded derivative features whose fair value measurements contain significant Level 3 inputs.

Fair Value Hierarchy Level within Which Fair Value of Financial and Non-Financial Assets has been Recorded

The following table presents the fair value hierarchy level within which the fair value of the financial and non-financial assets has been recorded as of September 30, 2014 and December 31, 2013. The gains (losses) during the three and nine months ended September 30, 2014 and 2013 are also included.



	Non-Recurring Fair Value Measurements as of September 30, 2014								Total Gains (Losses) For the Three Months Ended September 30, 2014			Total Gains (Losses) For the Nine Months Ended September 30, 2014
	Level 1		Level 2		Level 3		Total
	(in millions)
Residential mortgage loans held for sale⁽¹⁾	$	—	$	3	$	21	$	24	$	(1	)	$	(1	)
Impaired commercial loans⁽²⁾	—		—		19		19		3			6
Consumer loans⁽³⁾	—		139		—		139		(10		)	(33		)
Real estate owned⁽⁴⁾	—		19		—		19		2			4
Commercial loans held for sale⁽⁵⁾	—		80		—		80		—			(7		)
Total assets at fair value on a non-recurring basis	$	—	$	241	$	40	$	281	$	(6	)	$	(31	)



	Non-Recurring Fair Value Measurements as of December 31, 2013								Total Gains (Losses) For the Three Months Ended September 30, 2013			Total Gains (Losses) For the Nine Months Ended September 30, 2013
	Level 1		Level 2		Level 3		Total
	(in millions)
Residential mortgage loans held for sale⁽¹⁾	$	—	$	9	$	56	$	65	$	(14	)	$	(4	)
Impaired commercial loans⁽²⁾	—		—		108		108		19			17
Consumer loans⁽³⁾	—		492		—		492		(21		)	(72		)
Real estate owned⁽⁴⁾	—		20		—		20		(2		)	—
Total assets at fair value on a non-recurring basis	$	—	$	521	$	164	$	685	$	(18	)	$	(59	)

⁽¹⁾

As of September 30, 2014 and December 31, 2013, the fair value of the loans held for sale was below cost. Certain residential mortgage loans held for sale have been classified as a Level 3 fair value measurement within the fair value hierarchy as the underlying real estate properties which determine fair value are illiquid assets as a result of market conditions and significant inputs in estimating fair value were unobservable. Additionally, the fair value of these properties is affected by, among other things, the location, the payment history and the completeness of the loan documentation.

⁽²⁾

Certain commercial loans have undergone troubled debt restructurings and are considered impaired. As a matter of practical expedient, we measure the credit impairment of a collateral-dependent loan based on the fair value of the collateral asset. The collateral often involves real estate properties that are illiquid due to market conditions. As a result, these loans are classified as a Level 3 fair value measurement within the fair value hierarchy.


⁽³⁾	Represents residential mortgage loans held for investment whose carrying amount was reduced during the periods presented based on the fair value of the underlying collateral.


⁽⁴⁾	Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value unadjusted for transaction costs.


⁽⁵⁾	As of September 30, 2014, the fair value of the loans held for sale was below cost.

Quantitative Information about Non Recurring Fair Value Measurement of Assets and Liabilities

The following table presents quantitative information about non-recurring fair value measurements of assets and liabilities classified with Level 3 of the fair value hierarchy as of September 30, 2014 and December 31, 2013:



As of September 30, 2014
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs
Residential mortgage loans held for sale	$	21	Valuation of third party appraisal on underlying collateral	Loss severity rates	0% - 100%
Impaired commercial loans	19		Valuation of third party appraisal on underlying collateral	Loss severity rates	17% - 47%



As of December 31, 2013
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs
Residential mortgage loans held for sale	$	56	Valuation of third party appraisal on underlying collateral	Loss severity rates	0% - 100%
Impaired commercial loans	108		Valuation of third party appraisal on underlying collateral	Loss severity rates	1% - 66%

Additional Information Relating to Asset-Backed Securities and Collateralized Debt Obligations

The following tables provide additional information relating to asset-backed securities as well as certain collateralized debt obligations held as of September 30, 2014:

Trading asset-backed securities:



Rating of Securities:⁽¹⁾	Collateral Type:	Level 2		Level 3		Total
		(in millions)
AAA -A	Residential mortgages - Alt A	$	87	$	—	$	87
	Residential mortgages - Subprime	57		—		57
	Student loans	84		—		84
	Total AAA -A	228		—		228
BBB -B	Collateralized debt obligations	—		269		269
CCC-Unrated	Residential mortgages - Subprime	5		—		5
		$	233	$	269	$	502

Available-for-sale securities backed by collateral:



Rating of Securities:⁽¹⁾	Collateral Type:	Level 2		Level 3		Total
		(in millions)
AAA -A	Commercial mortgages	$	60	$	—	$	60
	Home equity - Alt A	92		—		92
	Other	95		—		95
	Total AAA -A	247		—		247
CCC -Unrated	Residential mortgages - Alt A	1		—		1
		$	248	$	—	$	248


⁽¹⁾	We utilize S&P as the primary source of credit ratings in the tables above. If S&P ratings are not available, ratings by Moody's and Fitch are used in that order. Ratings for collateralized debt obligations represent the ratings associated with the underlying collateral.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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