Morgan Stanley 2009 Annual Report Download - page 83

Funding Management Policies.
The Company’s funding management policies are designed to provide for financings that are executed in a
manner that reduces the risk of disruption to the Company’s operations. The Company pursues a strategy of
diversification of secured and unsecured funding sources (by product, by investor and by region) and attempts to
ensure that the tenor of the Company’s liabilities equals or exceeds the expected holding period of the assets
being financed. Maturities of financings are designed to manage exposure to refinancing risk in any one period.
The Company funds its balance sheet on a global basis through diverse sources. These sources may include the
Company’s equity capital, long-term debt, repurchase agreements, securities lending, deposits, commercial
paper, letters of credit and lines of credit. The Company has active financing programs for both standard and
structured products in the U.S., European and Asian markets, targeting global investors and currencies such as
the U.S. dollar, euro, British pound, Australian dollar and Japanese yen.
Secured Financing. A substantial portion of the Company’s total assets consists of liquid marketable securities
and short-term receivables arising principally from its Institutional Securities sales and trading activities. The
liquid nature of these assets provides the Company with flexibility in financing these assets with collateralized
borrowings.
The Company’s goal is to achieve an optimal mix of secured and unsecured funding through appropriate use of
collateralized borrowings. The Institutional Securities business segment emphasizes the use of collateralized
short-term borrowings to limit the growth of short-term unsecured funding, which is generally more subject to
disruption during periods of financial stress. As part of this effort, the Institutional Securities business segment
continually seeks to expand its global secured borrowing capacity.
In addition, the Company, through several of its subsidiaries, maintains committed credit facilities to support
various businesses, including the collateralized commercial and residential mortgage whole loan, derivative
contracts, warehouse lending, emerging market loan, structured product, corporate loan, investment banking and
prime brokerage businesses.
The Company also had the ability to access liquidity from the Board of Governors of the Federal Reserve System
(the “Fed”) against collateral through a number of lending facilities. The Primary Dealer Credit Facility
(“PDCF”) and the Primary Credit Facility were available to provide daily access to funding for primary dealers
and depository institutions, respectively. The Term Securities Lending Facility (“TSLF”) and the Term Auction
Facility were available to primary dealers and depository institutions, respectively, and allowed for the borrowing
of longer term funding on a regular basis that was available at auction on pre-announced dates. The PDCF and
TSLF expired on February 1, 2010.
Unsecured Financing. The Company views long-term debt and deposits as stable sources of funding for core
inventories and illiquid assets. Securities inventories not financed by secured funding sources and the majority of
current assets are financed with a combination of short-term funding, floating rate long-term debt or fixed rate
long-term debt swapped to a floating rate and deposits. The Company uses derivative products (primarily interest
rate, currency and equity swaps) to assist in asset and liability management and to hedge interest rate risk (see
Note 11 to the consolidated financial statements).
Temporary Liquidity Guarantee Program (“TLGP”). In October 2008, the Secretary of the U.S. Treasury
invoked the systemic risk exception of the FDIC Improvement Act of 1991, and the FDIC announced the TLGP.
Based on the Final Rule adopted on November 21, 2008, the TLGP provides a guarantee, through the earlier of
maturity or June 30, 2012, of certain senior unsecured debt issued by participating Eligible Entities (including the
Company) between October 14, 2008 and June 30, 2009. Effective March 23, 2009, the FDIC adopted an Interim
Rule that extends the expiration of the FDIC guarantee on debt issued by certain issuers (including the Company)
on or after April 1, 2009 to December 31, 2012. The maximum amount of FDIC-guaranteed debt a participating
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