Fair Value Measurements

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Fair Value Measurements	3 Months Ended
	Mar. 31, 2012
Fair Value Disclosures [Abstract]
Fair Value Measurements	NOTE 15 – Fair Value Measurements Under applicable accounting guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Corporation determines the fair values of its financial instruments based on the fair value hierarchy established under applicable accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value. For more information regarding the fair value hierarchy and how the Corporation measures fair value, see Note 1 – Summary of Significant Accounting Principles and Note 22 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation's 2011 Annual Report on Form 10-K. The Corporation accounts for certain financial instruments under the fair value option. For more information, see Note 16 – Fair Value Option. Valuation Processes The Corporation has various processes and controls in place to ensure that fair value is reasonably estimated. A model validation policy governs the use and control of valuation models used to estimate fair value. This policy requires review and approval of models by personnel who are independent of the front office, and periodic re-assessments of models to ensure that they are continuing to perform as designed. In addition, detailed reviews of trading gains and losses are analyzed on a daily basis by personnel who are independent of the front office. A price verification group, which is also independent of the front office, utilizes available market information including executed trades, market prices and market-observable valuation model inputs to ensure that fair values are reasonably estimated. The Corporation performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process. Where market information is not available to support internal valuations, independent reviews of the valuations are performed and any material exposures are escalated through a management review process. While the Corporation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. During the three months ended March 31, 2012, there were no changes to the Corporation's valuation techniques that had, or are expected to have, a material impact on its consolidated financial position or results of operations. Recurring Fair Value Assets and liabilities carried at fair value on a recurring basis at March 31, 2012 and December 31, 2011, including financial instruments which the Corporation accounts for under the fair value option, are summarized in the following tables.   March 31, 2012   Fair Value Measurements         (Dollars in millions) Level 1 (1)   Level 2 (1)   Level 3   Netting Adjustments (2)   Assets/Liabilities at Fair Value Assets                   Federal funds sold and securities borrowed or purchased under agreements to resell $ —   $ 95,003   $ —   $ —   $ 95,003 Trading account assets:                   U.S. government and agency securities 44,083   25,581   —   —   69,664 Corporate securities, trading loans and other 994   32,115   6,001   —   39,110 Equity securities 24,574   8,236   525   —   33,335 Non-U.S. sovereign debt 40,245   11,280   546   —   52,071 Mortgage trading loans and ABS —   11,583   4,012   —   15,595 Total trading account assets 109,896   88,795   11,084   —   209,775 Derivative assets (3) 2,780   1,488,433   11,315   (1,443,477 )   59,051 AFS debt securities:                   U.S. Treasury securities and agency securities 36,539   3,427   —   —   39,966 Mortgage-backed securities:                   Agency —   175,058   33   —   175,091 Agency-collateralized mortgage obligations —   42,355   —   —   42,355 Non-agency residential —   11,441   29   —   11,470 Non-agency commercial —   4,861   38   —   4,899 Non-U.S. securities 3,363   3,205   —   —   6,568 Corporate/Agency bonds —   2,290   131   —   2,421 Other taxable securities 20   6,422   4,175   —   10,617 Tax-exempt securities —   1,758   1,895   —   3,653 Total AFS debt securities 39,922   250,817   6,301   —   297,040 Loans and leases —   6,410   2,782   —   9,192 Mortgage servicing rights —   —   7,589   —   7,589 Loans held-for-sale —   4,696   2,862   —   7,558 Other assets 22,153   10,031   3,487   —   35,671 Total assets $ 174,751   $ 1,944,185   $ 45,420   $ (1,443,477 )   $ 720,879 Liabilities                   Interest-bearing deposits in U.S. offices $ —   $ 3,191   $ —   $ —   $ 3,191 Federal funds purchased and securities loaned or sold under agreements to repurchase —   54,434   —   —   54,434 Trading account liabilities:                   U.S. government and agency securities 19,789   761   —   —   20,550 Equity securities 19,571   2,080   —   —   21,651 Non-U.S. sovereign debt 17,866   1,180   —   —   19,046 Corporate securities and other 638   8,405   124   —   9,167 Total trading account liabilities 57,864   12,426   124   —   70,414 Derivative liabilities (3) 2,437   1,468,536   7,128   (1,428,929 )   49,172 Other short-term borrowings —   6,395   —   —   6,395 Accrued expenses and other liabilities 16,775   1,681   3   —   18,459 Long-term debt —   48,537   2,500   —   51,037 Total liabilities $ 77,076   $ 1,595,200   $ 9,755   $ (1,428,929 )   $ 253,102 (1)  During the three months ended March 31, 2012, approximately $1.7 billion and $350 million of assets and liabilities were transferred from Level 1 to Level 2, and approximately $250 million and $40 million of assets and liabilities were transferred from Level 2 to Level 1. Approximately $640 million of the transfer from Level 1 to Level 2 was due to a restriction that became effective for a private equity investment. The remaining transfers were the result of additional information associated with certain equities, derivative contracts and private equity investments. (2)  Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties. (3)  For further disaggregation of derivative assets and liabilities, see Note 3 – Derivatives.   December 31, 2011   Fair Value Measurements         (Dollars in millions) Level 1 (1)   Level 2 (1)   Level 3   Netting Adjustments (2)   Assets/Liabilities at Fair Value Assets                   Federal funds sold and securities borrowed or purchased under agreements to resell $ —   $ 87,453   $ —   $ —   $ 87,453 Trading account assets:                   U.S. government and agency securities 30,540   22,073   —   —   52,613 Corporate securities, trading loans and other 1,067   28,624   6,880   —   36,571 Equity securities 17,181   5,949   544   —   23,674 Non-U.S. sovereign debt 33,667   8,937   342   —   42,946 Mortgage trading loans and ABS —   9,826   3,689   —   13,515 Total trading account assets 82,455   75,409   11,455   —   169,319 Derivative assets (3) 2,186   1,865,310   14,366   (1,808,839 )   73,023 AFS debt securities:                   U.S. Treasury securities and agency securities 39,389   3,475   —   —   42,864 Mortgage-backed securities:                   Agency —   142,526   37   —   142,563 Agency-collateralized mortgage obligations —   44,999   —   —   44,999 Non-agency residential —   13,907   860   —   14,767 Non-agency commercial —   5,482   40   —   5,522 Non-U.S. securities 1,664   3,256   —   —   4,920 Corporate/Agency bonds —   2,873   162   —   3,035 Other taxable securities 20   8,593   4,265   —   12,878 Tax-exempt securities —   1,955   2,648   —   4,603 Total AFS debt securities 41,073   227,066   8,012   —   276,151 Loans and leases —   6,060   2,744   —   8,804 Mortgage servicing rights —   —   7,378   —   7,378 Loans held-for-sale —   4,243   3,387   —   7,630 Other assets 18,963   13,886   4,235   —   37,084 Total assets $ 144,677   $ 2,279,427   $ 51,577   $ (1,808,839 )   $ 666,842 Liabilities                   Interest-bearing deposits in U.S. offices $ —   $ 3,297   $ —   $ —   $ 3,297 Federal funds purchased and securities loaned or sold under agreements to repurchase —   34,235   —   —   34,235 Trading account liabilities:                   U.S. government and agency securities 19,120   1,590   —   —   20,710 Equity securities 13,259   1,335   —   —   14,594 Non-U.S. sovereign debt 16,760   680   —   —   17,440 Corporate securities and other 829   6,821   114   —   7,764 Total trading account liabilities 49,968   10,426   114   —   60,508 Derivative liabilities (3) 2,055   1,850,804   8,500   (1,801,839 )   59,520 Other short-term borrowings —   6,558   —   —   6,558 Accrued expenses and other liabilities 13,832   1,897   14   —   15,743 Long-term debt —   43,296   2,943   —   46,239 Total liabilities $ 65,855   $ 1,950,513   $ 11,571   $ (1,801,839 )   $ 226,100 (1)  Gross transfers between Level 1 and Level 2 during 2011 were not significant. (2)  Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties. (3)  For further disaggregation of derivative assets and liabilities, see Note 3 – Derivatives. The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2012 and 2011, including net realized and unrealized gains (losses) included in earnings and accumulated OCI. Level 3 – Fair Value Measurements (1)   Three Months Ended March 31, 2012         Gross       (Dollars in millions) Balance January 1 2012 Gains (Losses) in Earnings Gains (Losses) in OCI Purchases Sales Issuances Settlements Gross Transfers into Level 3 Gross Transfers out of Level 3 Balance March 31 2012 Trading account assets:                     Corporate securities, trading loans and other (2) $ 6,880 $ 93 $ — $ 675 $ (1,065 ) $ — $ (189 ) $ 59 $ (452 ) $ 6,001 Equity securities 544 15 — 79 (109 ) — (10 ) 8 (2 ) 525 Non-U.S. sovereign debt 342 24 — 273 (81 ) — — — (12 ) 546 Mortgage trading loans and ABS 3,689 99 — 184 (455 ) — (89 ) 742 (158 ) 4,012 Total trading account assets 11,455 231 — 1,211 (1,710 ) — (288 ) 809 (624 ) 11,084 Net derivative assets (3) 5,866 (837 ) — 359 (321 ) — (634 ) 106 (352 ) 4,187 AFS debt securities:                     Mortgage-backed securities:                     Agency 37 — — — — — (4 ) — — 33 Non-agency residential 860 (69 ) 19 — (293 ) — — — (488 ) 29 Non-agency commercial 40 — — — — — (2 ) — — 38 Corporate/Agency bonds 162 (2 ) — (2 ) — — — — (27 ) 131 Other taxable securities 4,265 7 17 362 — — (418 ) — (58 ) 4,175 Tax-exempt securities 2,648 26 18 — (35 ) — (762 ) — — 1,895 Total AFS debt securities 8,012 (38 ) 54 360 (328 ) — (1,186 ) — (573 ) 6,301 Loans and leases (2, 4) 2,744 164 — — — — (117 ) — (9 ) 2,782 Mortgage servicing rights (4) 7,378 655 — — — 77 (521 ) — — 7,589 Loans held-for-sale (2) 3,387 169 — 4 — — (97 ) 31 (632 ) 2,862 Other assets (5) 4,235 (32 ) — 43 (581 ) — (167 ) — (11 ) 3,487 Trading account liabilities – Corporate securities and other (114 ) — — 48 (27 ) — — (65 ) 34 (124 ) Accrued expenses and other liabilities (2) (14 ) 3 — 5 — — — — 3 (3 ) Long-term debt (2) (2,943 ) (241 ) — 76 (33 ) (65 ) 433 (532 ) 805 (2,500 ) (1)  Assets (liabilities). For assets, increase / (decrease) to Level 3 and for liabilities, (increase) / decrease to Level 3. (2)  Amounts represent items that are accounted for under the fair value option. (3)  Net derivatives include derivative assets of $11.3 billion and derivative liabilities of $7.1 billion. (4)  Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole loan sales. (5)  Other assets is primarily comprised of net monoline exposure to a single counterparty and private equity investments. During the three months ended March 31, 2012, the transfers into Level 3 included $809 million of trading account assets, $106 million of net derivative assets and $532 million of long-term debt. Transfers into Level 3 for trading account assets were primarily the result of additional information related to certain CLOs. Transfers into Level 3 for net derivative assets primarily related to decreased market activity (i.e., executed trades) for certain structured rate derivatives. Transfers into Level 3 for long-term debt were primarily due to changes in the impact of unobservable inputs on the value of certain structured liabilities. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole. During the three months ended March 31, 2012, the transfers out of Level 3 included $624 million of trading account assets, $352 million of net derivative assets, $573 million of AFS debt securities, $632 million of LHFS and $805 million of long-term debt. Transfers out of Level 3 for trading account assets primarily related to increased market liquidity for certain corporate loans and loans backed by commercial real estate. Transfers out of Level 3 for net derivative assets primarily related to increased price observability (i.e., market comparables) for certain total return swaps and foreign exchange swaps. Transfers out of Level 3 for AFS debt securities primarily related to increased price observability for certain non-agency RMBS. Transfers out of Level 3 for LHFS primarily related to increased observable inputs, primarily liquid comparables. Transfers out of Level 3 for long-term debt were primarily due to changes in the impact of unobservable inputs on the value of certain structured liabilities. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole. Level 3 – Fair Value Measurements (1)   Three Months Ended March 31, 2011         Gross       (Dollars in millions) Balance January 1 2011 Gains (Losses) in Earnings Gains (Losses) in OCI Purchases Sales Issuances Settlements Gross Transfers into Level 3 Gross Transfers out of Level 3 Balance March 31 2011 Trading account assets:                     Corporate securities, trading loans and other (2) $ 7,751 $ 494 $ — $ 1,550 $ (2,350 ) $ — $ (181 ) $ 569 $ (255 ) $ 7,578 Equity securities 623 43 — 100 (70 ) — — 39 (1 ) 734 Non-U.S. sovereign debt 243 5 — 48 (4 ) — — — (40 ) 252 Mortgage trading loans and ABS 6,908 562 — 766 (1,086 ) — (64 ) 1 (390 ) 6,697 Total trading account assets 15,525 1,104 — 2,464 (3,510 ) — (245 ) 609 (686 ) 15,261 Net derivative assets (3) 7,745 438 — 502 (748 ) — (1,670 ) 307 (155 ) 6,419 AFS debt securities:                     Mortgage-backed securities:                     Agency 4 — — — — — — — (4 ) — Agency-collateralized mortgage obligations — — — 56 — — — — — 56 Non-agency residential 1,468 (16 ) (22 ) — (237 ) — (262 ) 272 — 1,203 Non-agency commercial 19 — — — — — — — — 19 Non-U.S. securities 3 — — — — — — — (3 ) — Corporate/Agency bonds 137 2 1 — (7 ) — — — — 133 Other taxable securities 13,018 29 57 552 (52 ) — (2,582 ) 2 — 11,024 Tax-exempt securities 1,224 (3 ) 6 — (49 ) — (32 ) — — 1,146 Total AFS debt securities 15,873 12 42 608 (345 ) — (2,876 ) 274 (7 ) 13,581 Loans and leases (2, 4) 3,321 172 — — (109 ) 846 (616 ) 5 — 3,619 Mortgage servicing rights (4) 14,900 247 — — — 841 (706 ) — — 15,282 Loans held-for-sale (2) 4,140 178 — 31 (173 ) — (123 ) 222 (16 ) 4,259 Other assets (5) 6,856 122 — 77 (941 ) — (288 ) — (1,633 ) 4,193 Trading account liabilities – Corporate securities and other (7 ) — — 7 (102 ) — — — — (102 ) Other short-term borrowings (2) (706 ) (46 ) — — — — 26 — — (726 ) Accrued expenses and other liabilities (2) (828 ) 143 — — (4 ) — — — — (689 ) Long-term debt (2) (2,986 ) (148 ) — 84 — (43 ) 239 (637 ) 353 (3,138 ) (1)  Assets (liabilities). For assets, increase / (decrease) to Level 3 and for liabilities, (increase) / decrease to Level 3. (2)  Amounts represent items that are accounted for under the fair value option. (3)  Net derivatives include derivative assets of $16.2 billion and derivative liabilities of $9.8 billion. (4)  Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole loan sales. (5)  Other assets is primarily comprised of AFS marketable equity securities. During the three months ended March 31, 2011, the transfers into Level 3 included $609 million of trading account assets and $637 million of long-term debt accounted for under the fair value option. Transfers into Level 3 for trading account assets were primarily certain CLOs that were transferred into Level 3 due to a lack of price transparency. Transfers into Level 3 for long-term debt were primarily due to changes in the impact of unobservable inputs on the value of certain structured liabilities. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole. During the three months ended March 31, 2011, the transfers out of Level 3 included $686 million of trading account assets and $1.6 billion of other assets. Transfers out of Level 3 for trading account assets were primarily driven by increased price observability on certain RMBS and consumer ABS portfolios. Transfers out of Level 3 for other assets were the result of an initial public offering of an equity investment. The table below summarizes gains (losses) due to changes in fair value, including both realized and unrealized gains (losses), recorded in earnings for Level 3 assets and liabilities during the three months ended March 31, 2012 and 2011. These amounts include gains (losses) on loans, LHFS, loan commitments and structured liabilities that are accounted for under the fair value option. Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings   Three Months Ended March 31, 2012 (Dollars in millions) Equity Investment Income (Loss)   Trading Account Profits (Losses)   Mortgage Banking Income (Loss) (1)   Other Income (Loss)   Total Trading account assets:                   Corporate securities, trading loans and other (2) $ —   $ 93   $ —   $ —   $ 93 Equity securities —   15   —   —   15 Non-U.S. sovereign debt —   24   —   —   24 Mortgage trading loans and ABS —   99   —   —   99 Total trading account assets —   231   —   —   231 Net derivative assets —   (1,373 )   536   —   (837 ) AFS debt securities:                   Non-agency residential MBS —   —   —   (69 )   (69 ) Corporate/Agency bonds —   —   —   (2 )   (2 ) Other taxable securities —   —   —   7   7 Tax-exempt securities —   —   —   26   26 Total AFS debt securities —   —   —   (38 )   (38 ) Loans and leases (2) —   —   —   164   164 Mortgage servicing rights —   —   655   —   655 Loans held-for-sale (2) —   —   90   79   169 Other assets 10   —   (8 )   (34 )   (32 ) Accrued expenses and other liabilities (2) —   —   —   3   3 Long-term debt (2) —   (139 )   —   (102 )   (241 ) Total $ 10   $ (1,281 )   $ 1,273   $ 72   $ 74                       Three Months Ended March 31, 2011 Trading account assets:                   Corporate securities, trading loans and other (2) $ —   $ 494   $ —   $ —   $ 494 Equity securities —   43   —   —   43 Non-U.S. sovereign debt —   5   —   —   5 Mortgage trading loans and ABS —   562   —   —   562 Total trading account assets —   1,104   —   —   1,104 Net derivative assets —   (459 )   897   —   438 AFS debt securities:                   Non-agency residential MBS —   —   —   (16 )   (16 ) Corporate/Agency bonds —   —   —   2   2 Other taxable securities —   12   —   17   29 Tax-exempt securities —   (3 )   —   —   (3 ) Total AFS debt securities —   9   —   3   12 Loans and leases (2) —   —   —   172   172 Mortgage servicing rights —   —   247   —   247 Loans held-for-sale (2) —   —   2   176   178 Other assets 122   —   —   —   122 Other short-term borrowings (2) —   —   (46 )   —   (46 ) Accrued expenses and other liabilities (2) —   (8 )   —   151   143 Long-term debt (2) —   (92 )   —   (56 )   (148 ) Total $ 122   $ 554   $ 1,100   $ 446   $ 2,222 (1)  Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs. (2)  Amounts represent instruments that are accounted for under the fair value option. The table below summarizes changes in unrealized gains (losses) recorded in earnings during the three months ended March 31, 2012 and 2011 for Level 3 assets and liabilities that were still held at March 31, 2012 and 2011. These amounts include changes in fair value on loans, LHFS, loan commitments and structured liabilities that are accounted for under the fair value option. Level 3 – Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date   Three Months Ended March 31, 2012 (Dollars in millions) Equity Investment Income (Loss)   Trading Account Profits (Losses)   Mortgage Banking Income (Loss) (1)   Other Income (Loss)   Total Trading account assets:                   Corporate securities, trading loans and other (2) $ —   $ 56   $ —   $ —   $ 56 Equity securities —   11   —   —   11 Non-U.S. sovereign debt —   13   —   —   13 Mortgage trading loans and ABS —   53   —   —   53 Total trading account assets —   133   —   —   133 Net derivative assets —   (1,314 )   360   —   (954 ) Loans and leases (2) —   —   —   214   214 Mortgage servicing rights —   —   470   —   470 Loans held-for-sale (2) —   —   55   23   78 Other assets (19 )   —   6   (34 )   (47 ) Accrued expenses and other liabilities (2) —   —   —   3   3 Long-term debt (2) —   (129 )   —   (102 )   (231 ) Total $ (19 )   $ (1,310 )   $ 891   $ 104   $ (334 )                       Three Months Ended March 31, 2011 Trading account assets:                   Corporate securities, trading loans and other (2) $ —   $ 402   $ —   $ —   $ 402 Equity securities —   19   —   —   19 Non-U.S. sovereign debt —   3   —   —   3 Mortgage trading loans and ABS —   509   —   —   509 Total trading account assets —   933   —   —   933 Net derivative assets —   (290 )   428   —   138 AFS debt securities:                   Non-agency residential MBS —   —   —   (68 )   (68 ) Total AFS debt securities —   —   —   (68 )   (68 ) Loans and leases (2) —   —   —   169   169 Mortgage servicing rights —   —   (64 )   —   (64 ) Loans held-for-sale (2) —   —   (12 )   159   147 Other assets (131 )   —   —   —   (131 ) Other short-term borrowings (2) —   —   (34 )   —   (34 ) Accrued expenses and other liabilities (2) —   (8 )   —   108   100 Long-term debt (2) —   (92 )   —   (56 )   (148 ) Total $ (131 )   $ 543   $ 318   $ 312   $ 1,042 (1)  Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs. (2)  Amounts represent instruments that are accounted for under the fair value option. The following tables present information about significant unobservable inputs related to the Corporation's material categories of Level 3 financial assets and liabilities at March 31, 2012. Quantitative Information about Level 3 Fair Value Measurements (Dollars in millions)   Inputs Financial Instrument Fair Value Significant Unobservable Inputs Ranges of Inputs Loans and Securities (1)       Instruments backed by residential real estate assets $ 5,542 Yield 1% to 25% Trading account assets – Mortgage trading loans and ABS 689 Prepayment speeds 0% to 25% CPR Loans and leases 2,332 Default rates 0% to 54% CDR Loans held-for-sale 2,521 Loss severities 0% to 80% Instruments backed by commercial real estate assets $ 2,449 Yield 1% to 15% Trading account assets – Mortgage trading loans and ABS 299 Loss severities 0% to 91% Loans held-for-sale 341     Other assets 1,809     Instruments backed by other assets $ 3,089 Yield 1% to 5% Trading account assets – Mortgage trading loans and ABS 184     AFS debt securities – Other taxable securities 2,455     Loans and leases 450     Corporate loans and debt securities $ 2,773 Yield 2% to 20% Trading account assets – Corporate securities, trading loans and other 2,773 Enterprise value/EBITDA multiple 3x to 7x Corporate CLOs and CDOs $ 4,520 Prepayment speed 5% to 25% Trading account assets – Corporate securities, trading loans and other 1,219 Default rates 1% to 5% Trading account assets – Mortgage trading loans and ABS 2,840 Loss severity 25% to 40% AFS debt securities – Other taxable securities 461 Yield 2% to 20% Auction rate securities $ 5,163 Weighted-average life 5 years Trading account assets – Corporate securities, trading loans and other 2,009 Discount rate LIBOR +200 or JJK +150 AFS debt securities – Other taxable securities 1,259 Projected tender price/Re-financing level 50% to 99% AFS debt securities – Tax-exempt securities 1,895   Structured liabilities       Long-term debt $ (2,500 ) Correlation (Index/Index) 50% to 97%     Correlation (Stock/Stock) 30% to 80%     Long-dated volatilities 20% to 70% (1)  The total amount of the Level 3 line items that cross multiple categories of loans and securities for which ranges of inputs are provided in the table above is as follows: trading account assets – corporate securities, trading loans and other of $6.0 billion, trading account assets – mortgage trading loans and ABS of $4.0 billion, AFS debt securities – other taxable securities of $4.2 billion, AFS debt securities – tax-exempt securities of $1.9 billion, loans and leases of $2.8 billion, LHFS of $2.9 billion and other assets of $1.8 billion. Such amounts agree to the respective line items in the table on page 194. CPR = Constant Prepayment Rate CDR = Constant Default Rate EBITDA = Earnings before interest, taxes, depreciation and amortization JJK = J.J. Kenny (tax-exempt municipal rate) Quantitative Information about Level 3 Fair Value Measurements (continued) (Dollars in millions)   Inputs Financial Instrument Fair Value Significant Unobservable Inputs Ranges of Inputs Net derivatives assets       Credit default swaps referencing CLOs and corporate assets $ 849 Prepayment speed 5% to 25%     Default rates 1% to 5%     Loss severity 25% to 40%     Yield 2% to 20%     Credit spreads 100 bps to 500 bps     Recovery 30% to 50% Credit default swaps referencing other assets $ 1,072 Upfront points 53 points to 99 points     Correlation 45% to 70%     Spread to index -1,000 bps to 4,000 bps     Yield 6% to 25%     Prepayment speed 0% to 25% CPR     Default rates 0% to 4% CDR     Loss severity 0% to 65% Structured credit derivatives $ 2,114 Default correlation 30% to 80%     Wrong-way correlation 20% to 50%     Ratings-based spreads 300 bps to 500 bps Equity derivatives $ (657 ) Correlation (Index/Index) 50% to 97%     Correlation (Stock/Stock) 30% to 80%     Long-dated volatilities 20% to 70% Commodity derivatives $ (14 ) Long-term natural gas basis curve -$0.53 to $0.22 Interest rate derivatives $ 823 Correlation (IR/IR) 46% to 98%     Correlation (FX/IR) -65% to 50%     Long-dated inflation rates 2% to 3%     Long-dated inflation volatilities 1% to 2%     Long-dated volatilities (IR, FX) 4% to 45%     Long-dated swap rates 11% to 12% Total net derivative assets $ 4,187     CPR = Constant Prepayment Rate CDR = Constant Default Rate IR = Interest Rate FX = Foreign Exchange In the tables above, instruments valued using a discounted cash flow model include instruments backed by residential and commercial real estate assets including RMBS, CMBS, whole loans, mortgage CDOs and net monoline exposure, and instruments backed by other assets (i.e., securities backed by non-real estate assets), corporate loans, debt securities, CLOs, CDOs and auction rate securities. In addition, market comparables are used in the valuation of certain corporate loans, debt securities and auction rate securities. Structured liabilities primarily include equity-linked notes that are accounted for under the fair value option. The equity exposure in these instruments is valued using industry standard derivative pricing models such as Monte Carlo simulation and Black Scholes. CDS referencing CLOs and corporate and other assets, primarily CDS on residential and commercial single name and baskets, and commodity derivatives are valued using a discounted cash flow model. For CDS referencing corporate assets, a hazard rate model, which is an industry standard model for valuing CDS for single names or indices, is also utilized. Structured credit derivatives include tranched portfolio CDS and derivatives with derivative product company (DPC) and monoline counterparties. These instruments are valued using a Stochastic recovery correlation model which is adjusted for counterparty credit risk. Equity and interest rate derivatives are valued using industry standard derivative pricing models such as Monte Carlo simulation, Black Scholes and other numerical methods that, for example, model the joint dynamics of interest, inflation and foreign exchange rates. In addition to the instruments in the tables above, the Corporation holds $1.7 billion of instruments consisting primarily of certain direct private equity investments and private equity funds that are classified as Level 3 and reported within other assets. Valuations of direct private equity investments are prepared internally based on the most recent company financial information. Inputs generally include market and acquisition comparables, entry level multiples, as well as other variables. The Corporation selects a valuation methodology (e.g., market comparables) for each investment and, in certain instances, multiple inputs are weighted to derive the most representative value. Discounts are applied as appropriate to consider the lack of liquidity and marketability versus publicly-traded companies. For private equity funds, fair value is determined using the net asset value as provided by the individual fund's general partner. For information on the inputs and techniques used in the valuation of MSRs, see Note 18 – Mortgage Servicing Rights. Sensitivity of Fair Value Measurements to Changes in Unobservable Inputs Loans and Securities For instruments backed by residential real estate assets, commercial real estate assets, and corporate CLOs and CDOs, a significant increase in market yields, default rates or loss severities would result in a significantly lower fair value for long positions. Short positions would be impacted in a directionally opposite way. The impact of changes in prepayment speeds would have differing impacts depending on the seniority of the instrument and, in the case of CLOs, whether prepayments can be reinvested. For closed-end auction rate securities, a significant increase in discount rates would result in a significantly lower fair value. The impact of a significant change in the weighted-average life on the fair value is dependent upon how the coupon on the auction rate security compares to the discount rate. In cases where the coupon is higher than the discount rate, lengthening of the weighted-average life would result in a higher fair value. Conversely, in cases where the coupon rate is lower than the discount rate, lengthening of the weighted-average life would result in a lower fair value. For student loan and municipal auction rate securities, a significant increase in projected tender price/refinancing levels would result in a significantly higher fair value. Structured Liabilities and Derivatives For CDS referencing CLOs and corporate and other assets, a significant increase in market yield, including spreads to indices, upfront points (i.e., a single upfront payment made by a protection buyer at inception) or spreads, default rates or loss severities would result in a significantly lower fair value for protection sellers and higher fair value for protection buyers. The impact of changes in prepayment speeds would have differing impacts depending on the seniority of the instrument and, in the case of CLOs, whether prepayments can be reinvested. Default correlation, which is a parameter that describes the degree of dependence between credit default rates within a credit portfolio that underlies a credit derivative instrument, is utilized in valuing synthetic basket positions and structured credit derivatives. The sensitivity of this input on the fair value varies depending on the level of subordination of the tranche. For senior tranches that are net purchases of protection, a significant increase in default correlation would result in a significantly higher fair value. Net short protection positions would be impacted in a directionally opposite way. Transactions with DPC counterparties are impacted by ratings-based spreads and wrong-way correlation with the underlying derivative exposure. Ratings-based spreads represent the CDS spread implied from liquid credits with comparable credit ratings. A significant increase in ratings-based spreads would result in a significantly lower fair value for net long positions. Net short positions would be impacted in a directionally opposite way. Wrong-way correlation is a parameter that describes the probability that as exposure to a counterparty increases, the credit quality of the counterparty decreases. A significantly higher degree of wrong-way correlation between the DPC counterparty and underlying derivative exposure would result in a significantly lower fair value. For equity derivatives, equity-linked long-term debt (structured liabilities) and interest rate derivatives, a significant change in long-dated rates and volatilities and correlation inputs (e.g., the degree of correlation between an equity security to an index, between two different interest rates, or between interest rates and foreign exchange rates) would result in a significant impact to the fair value. However, the magnitude and direction of the impact depends on whether the Corporation is long or short the exposure. Nonrecurring Fair Value The Corporation held certain assets that are measured at fair value on a nonrecurring basis and are not included in the previous tables in this Note. These assets primarily include LHFS, certain loans and leases, and foreclosed properties. The amounts below represent only balances measured at fair value during the three months ended March 31, 2012 and 2011, and still held as of the reporting date. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis   March 31, 2012   Three Months Ended March 31, 2012 (Dollars in millions) Level 2   Level 3   Gains (Losses) Assets           Loans held-for-sale $ 3,465   $ 857   $ 68 Loans and leases (1) 21   5,813   (1,497 ) Foreclosed properties (2) —   2,149   (90 ) Other assets —   14   —               March 31, 2011   Three Months Ended March 31, 2011 (Dollars in millions) Level 2   Level 3   Gains (Losses) Assets           Loans held-for-sale $ 587   $ 5,043   $ 38 Loans and leases (1) 22   7,598   (1,609 ) Foreclosed properties (2) —   2,028   (72 ) Other assets —   91   (4 ) (1)  Gains (losses) represent charge-offs on real estate-secured loans. (2)  Amounts are included in other assets on the Consolidated Balance Sheet and represent fair value and related losses on foreclosed properties that were written down subsequent to their initial classification as foreclosed properties. The table below presents information about significant unobservable inputs related to the Corporation's nonrecurring Level 3 financial assets and liabilities at March 31, 2012. Quantitative Information about Nonrecurring Level 3 Fair Value Measurements (Dollars in millions)   Inputs Financial Instrument Fair Value Significant Unobservable Inputs Ranges of Inputs Instruments backed by residential real estate assets $ 6,537 Yield 4% to 7% Loans held-for-sale 724 Prepayment speeds 3% to 24% Loans and leases 5,813 Default rates 0% to 59%     Loss severities 0% to 60%     OREO discount 1% to 28%     Cost to sell 8% Instruments backed by commercial real estate assets $ 133 Yield 4% to 15% Loans held-for-sale 133 Loss severities 0% to 91% Instruments backed by residential real estate assets represent residential mortgages where the loan has been written down to the fair value of the underlying collateral. These loans are valued based on market comparables. Additionally, whole loans with fair value below cost are included in instruments backed by residential and commercial real estate assets and are valued using a discounted cash flow model. In addition to the instruments disclosed in the table above, the Corporation holds foreclosed residential properties where the fair value is based on unadjusted third-party appraisals or broker price opinions. Appraisals are conducted every 90 days. Factors considered in determining the fair value include geographic sales trends, the value of comparable surrounding properties as well as the condition of the property.