Morgan Stanley 2010 Annual Report Download - page 182

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Securitization transactions generally involve VIEs. The Company owned additional securities issued by
securitization SPEs for which the maximum exposure to loss is less than specific thresholds. These additional
securities totaled $5.7 billion at December 31, 2010. These securities were either retained in connection with
transfers of assets by the Company or acquired in connection with secondary market-making activities. Securities
issued by securitization SPEs consist of $2.1 billion of securities backed primarily by residential mortgage loans,
$0.6 billion of securities backed by U.S. agency collateralized mortgage obligations, $1.2 billion of securities
backed by commercial mortgage loans, $1.1 billion of securities backed by collateralized debt obligations or
collateralized loan obligations and $0.7 billion backed by other consumer loans, such as credit card receivables,
automobile loans and student loans. The Company’s primary risk exposure is limited to the securities issued by
the SPE owned by the Company, with the risk highest on the most subordinate class of beneficial interests. These
securities generally are included in Financial instruments owned—Corporate and other debt and are measured at
fair value. The Company does not provide additional support in these transactions through contractual facilities,
such as liquidity facilities, guarantees or similar derivatives. The Company’s maximum exposure to loss is equal
to the fair value of the securities owned.
The following table presents information about the Company’s non-consolidated VIEs at December 31, 2009 in
which the Company had significant variable interests or served as the sponsor and had any variable interest as of
that date. The non-consolidated VIEs included in the December 31, 2010 and December 31, 2009 tables are
based on different criteria.
At December 31, 2009
Mortgage and
Asset-Backed
Securitizations
Credit and Real
Estate
Municipal
Tender
Option
Bonds
Other
Structured
Financings
(dollars in millions)
VIE assets that the Company does not consolidate ....... $720 $11,848 $339 $5,775
Maximum exposure to loss:
Debt and equity interests ....................... $ 16 $ 2,330 $ 40 $ 861
Derivative and other contracts ................... 1 4,949 — —
Commitments, guarantees and other .............. — 200 31 623
Total maximum exposure to loss ............. $ 17 $ 7,479 $ 71 $1,484
Carrying value of exposure to loss—Assets:
Debt and equity interests ....................... $ 16 $ 2,330 $ 40 $ 682
Derivative and other contracts ................... 1 2,382 — —
Total carrying value of exposure to
loss—Assets ........................... $ 17 $ 4,712 $ 40 $ 682
Carrying value of exposure to loss—Liabilities:
Derivative and other contracts ................... $— $ 484 $— $ —
Commitments, guarantees and other .............. — — — 45
Total carrying value of exposure to loss—
Liabilities ............................. $— $ 484 $— $ 45
The Company’s transactions with VIEs primarily includes securitizations, municipal tender option bond trusts,
credit protection purchased through CLNs, collateralized loan and debt obligations, equity-linked notes, managed
real estate partnerships and asset management investment funds. Such activities are described below.
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