Morgan Stanley 2010 Annual Report Download - page 181

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents information about certain non-consolidated VIEs in which the Company had
variable interests at December 31, 2010. Many of the VIEs included in this table met the QSPE requirements
under previous accounting guidance. QSPEs were not included as non-consolidated VIEs in prior periods. The
table includes all VIEs in which the Company has determined that its maximum exposure to loss is greater than
specific thresholds or meets certain other criteria. The non-consolidated VIEs included in the December 31, 2010
and December 31, 2009 tables are based on different criteria.
At December 31, 2010
Mortgage and
Asset-Backed
Securitizations
Collateralized
Debt
Obligations
Municipal
Tender
Option
Bonds
Other
Structured
Financings Other
(dollars in millions)
VIE assets that the Company does not consolidate
(unpaid principal balance)(1) ................... $172,711 $38,332 $7,431 $2,037 $11,262
Maximum exposure to loss:
Debt and equity interests(2) .................. $ 8,129 $ 1,330 $ 78 $1,062 $ 2,678
Derivative and other contracts ................ 113 942 4,709 — 2,079
Commitments, guarantees and other ........... — — — 791 446
Total maximum exposure to loss .......... $ 8,242 $ 2,272 $4,787 $1,853 $ 5,203
Carrying value of exposure to loss—Assets:
Debt and equity interests(2) .................. $ 8,129 $ 1,330 $ 78 $ 779 $ 2,678
Derivative and other contracts ................ 113 753 — — 551
Total carrying value of exposure to loss—
Assets ............................. $ 8,242 $ 2,083 $ 78 $ 779 $ 3,229
Carrying value of exposure to loss—Liabilities:
Derivative and other contracts ................ $ 15 $ 123 $ — $ — $ 23
Commitments, guarantees and other ........... — — — 44 261
Total carrying value of exposure to loss—
Liabilities .......................... $ 15 $ 123 $ — $ 44 $ 284
(1) Mortgage and asset-backed securitizations include VIE assets as follows: $34.9 billion of residential mortgages; $94.0 billion of
commercial mortgages; $28.8 billion of U.S. agency collateralized mortgage obligations; and $15.0 billion of other consumer or
commercial loans.
(2) Mortgage and asset-backed securitizations include VIE debt and equity interests as follows: $1.9 billion of residential mortgages; $2.1
billion of commercial mortgages; $3.0 billion of U.S. agency collateralized mortgage obligations; and $1.1 billion of other consumer or
commercial loans.
The Company’s maximum exposure to loss often differs from the carrying value of the VIE’s assets. The
maximum exposure to loss is dependent on the nature of the Company’s variable interest in the VIEs and is
limited to the notional amounts of certain liquidity facilities, other credit support, total return swaps, written put
options, and the fair value of certain other derivatives and investments the Company has made in the VIEs.
Liabilities issued by VIEs generally are non-recourse to the Company. Where notional amounts are utilized in
quantifying maximum exposure related to derivatives, such amounts do not reflect fair value writedowns already
recorded by the Company.
The Company’s maximum exposure to loss does not include the offsetting benefit of any financial instruments
that the Company may utilize to hedge these risks associated with the Company’s variable interests. In addition,
the Company’s maximum exposure to loss is not reduced by the amount of collateral held as part of a transaction
with the VIE or any party to the VIE directly against a specific exposure to loss.
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