Morgan Stanley 2010 Annual Report Download - page 196

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Asset and Liability Management. In general, securities inventories not financed by secured funding sources
and the majority of 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. Fixed assets are generally financed with fixed rate long-term
debt. The Company uses interest rate swaps to more closely match these borrowings to the duration, holding
period and interest rate characteristics of the assets being funded and to manage interest rate risk. These swaps
effectively convert certain of the Company’s fixed rate borrowings into floating rate obligations. In addition, for
non-U.S. dollar currency borrowings that are not used to fund assets in the same currency, the Company has
entered into currency swaps that effectively convert the borrowings into U.S. dollar obligations. The Company’s
use of swaps for asset and liability management affected its effective average borrowing rate as follows:
2010 2009
Fiscal
2008
One Month
Ended
December 31,
2008
Weighted average coupon of long-term borrowings at period-end(1) ......... 3.6% 3.7% 4.9% 4.8%
Effective average borrowing rate for long-term borrowings after swaps at
period-end(1) .................................................. 2.4% 2.3% 4.0% 3.8%
(1) Included in the weighted average and effective average calculations are non-U.S. dollar interest rates.
Other. The Company, through several of its subsidiaries, maintains funded and unfunded 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.
FDIC’s Temporary Liquidity Guarantee Program.
At December 31, 2010 and December 31, 2009, the Company had long-term debt outstanding of $21.3 billion
and $23.8 billion, respectively, under the TLGP. The issuance of debt under the TLPG expired on December 31,
2010, but the existing long-term debt outstanding is guaranteed until June 30, 2012. These borrowings are senior
unsecured debt obligations of the Company and guaranteed by the FDIC under the TLGP. The FDIC has
concluded that the guarantee is backed by the full faith and credit of the U.S. government.
Other Secured Financings.
The Company’s other secured financings consisted of the following:
At
December 31,
2010
At
December 31,
2009
(dollars in millions)
Secured financings with original maturities greater than one year ................ $ 7,398 $5,396
Secured financings with original maturities one year or less(1) .................. 506 27
Failed sales ........................................................... 2,549 2,679
Total(2) ......................................................... $10,453 $8,102
(1) At December 31, 2010, amount included approximately $308 million of variable rate financings and approximately $198 million of fixed
rate financings.
(2) Amounts include $8,490 million at fair value at December 31, 2010 and $8,102 million at fair value at December 31, 2009.
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