Morgan Stanley 2010 Annual Report Download - page 185

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MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Transfers of Assets with Continuing Involvement.
The following tables present information at December 31, 2010 regarding transactions with SPEs in which the
Company, acting as principal, transferred assets with continuing involvement and received sales treatment. The
transferees in most of these transactions formerly met the criteria for QSPEs.
At December 31, 2010
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
U.S. Agency
Collateralized
Mortgage
Obligations
Credit-
Linked
Notes
and Other
(dollars in millions)
SPE assets (unpaid principal balance)(1) .................. $48,947 $85,974 $29,748 $11,462
Retained interests (fair value):
Investment grade ................................ $ 46 $ 64 $ 2,636 $ 8
Non-investment grade ............................ 206 81 — 2,327
Total retained interests (fair value) .............. $ 252 $ 145 $ 2,636 $ 2,335
Interests purchased in the secondary market (fair value):
Investment grade ................................ $ 118 $ 643 $ 155 $ 21
Non-investment grade ............................ 205 55 — 11
Total interests purchased in the secondary market
(fair value) ............................... $ 323 $ 698 $ 155 $ 32
Derivative assets (fair value) ........................... $ 75 $ 955 $ — $ 78
Derivative liabilities (fair value) ........................ $ 29 $ 80 $ — $ 314
(1) Amounts include assets transferred by unrelated transferors.
At December 31, 2010
Level 1 Level 2 Level 3 Total
(dollars in millions)
Retained interests (fair value):
Investment grade ........................................... $— $2,732 $ 22 $2,754
Non-investment grade ....................................... — 241 2,373 2,614
Total retained interests (fair value) ......................... $— $2,973 $2,395 $5,368
Interests purchased in the secondary market (fair value):
Investment grade ........................................... $— $ 929 $ 8 $ 937
Non-investment grade ....................................... — 255 16 271
Total interests purchased in the secondary market (fair value) .... $— $1,184 $ 24 $1,208
Derivative assets (fair value) ...................................... $— $ 887 $ 221 $1,108
Derivative liabilities (fair value) ................................... $— $ 360 $ 63 $ 423
Transferred assets are carried at fair value prior to securitization, and any changes in fair value are recognized in
the consolidated statements of income. The Company may act as underwriter of the beneficial interests issued by
securitization vehicles. Investment banking underwriting net revenues are recognized in connection with these
transactions. The Company may retain interests in the securitized financial assets as one or more tranches of the
securitization. These retained interests are included in the consolidated statements of financial condition at fair
value. Any changes in the fair value of such retained interests are recognized in the consolidated statements of
income.
179