Morgan Stanley 2010 Annual Report Download - page 225

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
17. Interest Income and Interest Expense.
Details of Interest income and Interest expense were as follows:
2010 2009
Fiscal
2008(1)
One Month
Ended December 31,
2008
(dollars in millions)
Interest income(2):
Financial instruments owned(3) ...................... $3,931 $4,931 $ 9,217 $ 395
Securities available for sale ......................... 215 — — —
Loans .......................................... 315 229 784 15
Interest bearing deposits with banks .................. 155 241 — 19
Federal funds sold and securities purchased under
agreements to resell and Securities borrowed ......... 769 859 — 380
Other .......................................... 1,893 1,217 28,930 280
Total Interest income .................................. $7,278 $7,477 $38,931 $1,089
Interest expense(2):
Commercial paper and other short-term borrowings ...... $ 28 $ 51 $ 663 $ 33
Deposits ........................................ 310 782 740 53
Long-term debt ................................... 4,592 4,898 7,793 579
Securities sold under agreements to repurchase and
Securities loaned ............................... 1,591 1,374 — 355
Other .......................................... (107) (400) 27,067 120
Total Interest expense ................................. $6,414 $6,705 $36,263 $1,140
Net interest .......................................... $ 864 $ 772 $ 2,668 $ (51)
(1) The Company considers its principal trading, investment banking, commissions, and interest income, along with the associated interest
expense, as one integrated activity, and therefore, prior to December 2008, was unable to further breakout Interest income and Interest
expense (see Note 1).
(2) Interest income and expense are recorded within the consolidated statements of income depending on the nature of the instrument and
related market conventions. When interest is included as a component of the instrument’s fair value, interest is included within Principal
transactions—Trading revenues or Principal transactions—Investment revenues. Otherwise, it is included within Interest income or
Interest expense.
(3) Interest expense on Financial instruments sold, not yet purchased is reported as a reduction to Interest income.
18. Sale of Bankruptcy Claims Related to a Derivative Counterparty.
During 2009, the Company entered into multiple participation agreements with certain investors whereby the
Company sold undivided participating interests representing 81% (or $1,105 million) of its claims totaling
$1,362 million, pursuant to International Swaps and Derivatives Association (“ISDA”) master agreements,
against a derivative counterparty that filed for bankruptcy protection. The Company received cash proceeds of
$429 million and recorded a gain on sale of $319 million in 2009. The gain is reflected in the consolidated
statement of income in Principal transactions—Trading revenues within the Institutional Securities business
segment.
As a result of the bankruptcy of the derivative counterparty, the Company, as contractually entitled, exercised
remedies as the non-defaulting party and determined the value of the claims under the ISDA master agreements
in a commercially reasonable manner. The Company filed its claims with the bankruptcy court. In connection
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