Fair Value Measurements

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Fair Value Measurements	6 Months Ended
	Jun. 30, 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 six months ended June 30, 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 June 30, 2012 and December 31, 2011, including financial instruments which the Corporation accounts for under the fair value option, are summarized in the following tables.   June 30, 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 $ —   $ 94,687   $ —   $ —   $ 94,687 Trading account assets:                   U.S. government and agency securities 51,020   25,214   —   —   76,234 Corporate securities, trading loans and other 1,415   26,215   4,459   —   32,089 Equity securities 19,009   9,912   597   —   29,518 Non-U.S. sovereign debt 38,333   12,557   389   —   51,279 Mortgage trading loans and ABS —   10,787   4,818   —   15,605 Total trading account assets 109,777   84,685   10,263   —   204,725 Derivative assets (3) 2,393   1,562,365   11,397   (1,516,216 )   59,939 AFS debt securities:                   U.S. Treasury securities and agency securities 26,681   3,150   —   —   29,831 Mortgage-backed securities:                   Agency —   194,191   —   —   194,191 Agency-collateralized mortgage obligations —   39,149   —   —   39,149 Non-agency residential —   10,514   1   —   10,515 Non-agency commercial —   4,103   24   —   4,127 Non-U.S. securities 3,133   2,632   —   —   5,765 Corporate/Agency bonds —   2,029   93   —   2,122 Other taxable securities 20   6,944   4,558   —   11,522 Tax-exempt securities —   1,687   1,140   —   2,827 Total AFS debt securities 29,834   264,399   5,816   —   300,049 Loans and leases —   6,726   1,635   —   8,361 Mortgage servicing rights —   —   5,708   —   5,708 Loans held-for-sale —   7,446   2,741   —   10,187 Other assets 19,570   9,919   3,136   —   32,625 Total assets $ 161,574   $ 2,030,227   $ 40,696   $ (1,516,216 )   $ 716,281 Liabilities                   Interest-bearing deposits in U.S. offices $ —   $ 2,874   $ —   $ —   $ 2,874 Federal funds purchased and securities loaned or sold under agreements to repurchase —   48,663   —   —   48,663 Trading account liabilities:                   U.S. government and agency securities 22,481   1,478   —   —   23,959 Equity securities 22,849   2,167   —   —   25,016 Non-U.S. sovereign debt 17,756   1,381   —   —   19,137 Corporate securities and other 616   8,587   143   —   9,346 Total trading account liabilities 63,702   13,613   143   —   77,458 Derivative liabilities (3) 2,145   1,551,295   6,796   (1,508,721 )   51,515 Other short-term borrowings —   4,468   —   —   4,468 Accrued expenses and other liabilities 15,972   1,535   2   —   17,509 Long-term debt —   45,957   2,388   —   48,345 Total liabilities $ 81,819   $ 1,668,405   $ 9,329   $ (1,508,721 )   $ 250,832 (1)  During the six months ended June 30, 2012, $1.7 billion and $350 million of assets and liabilities were transferred from Level 1 to Level 2, and $785 million and $40 million of assets and liabilities were transferred from Level 2 to Level 1. Of the asset transfer from Level 1 to Level 2, $640 million was due to a restriction that became effective for a private equity investment during the first quarter of 2012, while $535 million of the transfer from Level 2 to Level 1 was due to the lapse of this restriction during the second quarter of 2012. 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 and six months ended June 30, 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 June 30, 2012         Gross       (Dollars in millions) Balance April 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 June 30 2012 Trading account assets:                     Corporate securities, trading loans and other (2, 3) $ 6,001 $ 30 $ — $ 570 $ (1,585 ) $ — $ (556 ) $ 98 $ (99 ) $ 4,459 Equity securities 525 (6 ) — 45 (38 ) — 46 25 — 597 Non-U.S. sovereign debt 546 (26 ) — 35 (166 ) — — — — 389 Mortgage trading loans and ABS (3) 4,012 (16 ) — 1,183 (181 ) — (173 ) — (7 ) 4,818 Total trading account assets 11,084 (18 ) — 1,833 (1,970 ) — (683 ) 123 (106 ) 10,263 Net derivative assets (4) 4,187 1,110 — 354 (301 ) — (676 ) (39 ) (34 ) 4,601 AFS debt securities:                     Mortgage-backed securities:                     Agency 33 — — — — — — — (33 ) — Non-agency residential 29 — — — (12 ) — (2 ) — (14 ) 1 Non-agency commercial 38 — — — (11 ) — (3 ) — — 24 Corporate/Agency bonds 131 — — — — — (38 ) — — 93 Other taxable securities 4,175 — 6 596 — — (68 ) — (151 ) 4,558 Tax-exempt securities 1,895 28 7 — (34 ) — (756 ) — — 1,140 Total AFS debt securities 6,301 28 13 596 (57 ) — (867 ) — (198 ) 5,816 Loans and leases (2, 5) 2,782 51 — — (1,158 ) — (47 ) — 7 1,635 Mortgage servicing rights (5) 7,589 (1,592 ) — — (98 ) 91 (282 ) — — 5,708 Loans held-for-sale (2) 2,862 10 — 6 (21 ) — (129 ) 13 — 2,741 Other assets (6) 3,487 (102 ) — 6 (186 ) — (69 ) — — 3,136 Trading account liabilities – Corporate securities and other (124 ) — — 7 (42 ) — — — 16 (143 ) Accrued expenses and other liabilities (2) (3 ) 1 — — — — — — — (2 ) Long-term debt (2) (2,500 ) 93 — 42 — (73 ) 275 (506 ) 281 (2,388 ) (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)  During the three months ended June 30, 2012, approximately $900 million was reclassified from Trading account assets - Corporate securities, trading loans and other to Trading account assets - Mortgage trading loans and ABS. In the table above, this reclassification is presented as a sale of Trading account assets - Corporate securities, trading loans and other and as a purchase of Trading account assets - Mortgage trading loans and ABS. (4)  Net derivatives include derivative assets of $11.4 billion and derivative liabilities of $6.8 billion. (5)  Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole loan sales. (6)  Other assets is primarily comprised of net monoline exposure to a single counterparty and private equity investments. During the three months ended June 30, 2012, the transfers into Level 3 included $123 million of trading account assets and $506 million of long-term debt. Transfers into Level 3 for trading account assets primarily related to decreased market liquidity for certain corporate loans. 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 June 30, 2012, the transfers out of Level 3 included $106 million of trading account assets, $198 million of AFS debt securities and $281 million of long-term debt. Transfers out of Level 3 for trading account assets primarily related to increased market liquidity for certain corporate loans. Transfers out of Level 3 for AFS debt securities primarily related to increased price observability for certain ABS. 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. Level 3 – Fair Value Measurements (1)   Three Months Ended June 30, 2011           Gross       (Dollars in millions) Balance April 1 2011 Consolidation of VIEs Gains (Losses) in Earnings Gains (Losses) in OCI Purchases Sales Issuances Settlements Gross Transfers into Level 3 Gross Transfers out of Level 3 Balance June 30 2011 Trading account assets:                       Corporate securities, trading loans and other (2) $ 7,578 $ — $ 181 $ — $ 2,030 $ (2,187 ) $ — $ (338 ) $ 246 $ (58 ) $ 7,452 Equity securities 734 — 24 — 75 (136 ) — (115 ) 81 (1 ) 662 Non-U.S. sovereign debt 252 — 80 — 74 (11 ) — (3 ) 3 (4 ) 391 Mortgage trading loans and ABS 6,697 — 80 — 1,066 (2,160 ) — (164 ) — — 5,519 Total trading account assets 15,261 — 365 — 3,245 (4,494 ) — (620 ) 330 (63 ) 14,024 Net derivative assets (3) 6,419 — 1,807 — 384 (512 ) — (2,390 ) 33 (323 ) 5,418 AFS debt securities:                       Mortgage-backed securities:                       Agency-collateralized mortgage obligations 56 — — — — — — (1 ) — — 55 Non-agency residential 1,203 — (29 ) (6 ) 2 (53 ) — (27 ) 4 — 1,094 Non-agency commercial 19 — — — — — — (1 ) — — 18 Non-U.S. securities — — — — — — — — 88 — 88 Corporate/Agency bonds 133 — — (2 ) 86 — — — 7 — 224 Other taxable securities 11,024 — 23 5 898 (1 ) — (1,573 ) — (2 ) 10,374 Tax-exempt securities 1,146 — 9 (39 ) 683 (23 ) — (205 ) 38 — 1,609 Total AFS debt securities 13,581 — 3 (42 ) 1,669 (77 ) — (1,807 ) 137 (2 ) 13,462 Loans and leases (2, 4) 3,619 5,194 37 — 21 (267 ) 1,821 (828 ) — — 9,597 Mortgage servicing rights (4) 15,282 — (2,447 ) — — (234 ) 410 (639 ) — — 12,372 Loans held-for-sale (2) 4,259 — 7 — 92 (70 ) — (469 ) 219 (26 ) 4,012 Other assets (5) 4,193 — 180 — 95 (243 ) — (105 ) 375 — 4,495 Trading account liabilities – Corporate securities and other (102 ) — — — 69 (30 ) — — — — (63 ) Other short-term borrowings (2) (726 ) — (36 ) — — — — 18 — — (744 ) Accrued expenses and other liabilities (2) (689 ) — (79 ) — — — (9 ) — — — (777 ) Long-term debt (2) (3,138 ) — 5 — 131 (55 ) (206 ) 149 (393 ) 183 (3,324 ) (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 $15.2 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 June 30, 2011, there were no significant transfers into or out of Level 3. Level 3 – Fair Value Measurements (1)   Six Months Ended June 30, 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 June 30 2012 Trading account assets:                     Corporate securities, trading loans and other (2, 3) $ 6,880 $ 123 $ — $ 1,245 $ (2,650 ) $ — $ (745 ) $ 157 $ (551 ) $ 4,459 Equity securities 544 9 — 124 (147 ) — 36 33 (2 ) 597 Non-U.S. sovereign debt 342 (2 ) — 308 (247 ) — — — (12 ) 389 Mortgage trading loans and ABS (3) 3,689 83 — 1,367 (636 ) — (262 ) 742 (165 ) 4,818 Total trading account assets 11,455 213 — 3,044 (3,680 ) — (971 ) 932 (730 ) 10,263 Net derivative assets (4) 5,866 273 — 713 (622 ) — (1,310 ) 67 (386 ) 4,601 AFS debt securities:                     Mortgage-backed securities:                     Agency 37 — — — — — (4 ) — (33 ) — Non-agency residential 860 (69 ) 19 — (305 ) — (2 ) — (502 ) 1 Non-agency commercial 40 — — — (11 ) — (5 ) — — 24 Corporate/Agency bonds 162 (2 ) — (2 ) — — (38 ) — (27 ) 93 Other taxable securities 4,265 7 23 958 — — (486 ) — (209 ) 4,558 Tax-exempt securities 2,648 54 25 — (69 ) — (1,518 ) — — 1,140 Total AFS debt securities 8,012 (10 ) 67 956 (385 ) — (2,053 ) — (771 ) 5,816 Loans and leases (2, 5) 2,744 215 — — (1,158 ) — (164 ) — (2 ) 1,635 Mortgage servicing rights (5) 7,378 (937 ) — — (98 ) 168 (803 ) — — 5,708 Loans held-for-sale (2) 3,387 179 — 10 (21 ) — (226 ) 44 (632 ) 2,741 Other assets (6) 4,235 (134 ) — 49 (767 ) — (236 ) — (11 ) 3,136 Trading account liabilities – Corporate securities and other (114 ) — — 55 (69 ) — — (65 ) 50 (143 ) Accrued expenses and other liabilities (2) (14 ) 4 — 5 — — — — 3 (2 ) Long-term debt (2) (2,943 ) (148 ) — 118 (33 ) (138 ) 708 (1,038 ) 1,086 (2,388 ) (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)  During the six months ended June 30, 2012, approximately $900 million was reclassified from Trading account assets - Corporate securities, trading loans and other to Trading account assets - Mortgage trading loans and ABS. In the table above, this reclassification is presented as a sale of Trading account assets - Corporate securities, trading loans and other and as a purchase of Trading account assets - Mortgage trading loans and ABS. (4)  Net derivatives include derivative assets of $11.4 billion and derivative liabilities of $6.8 billion. (5)  Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole loan sales. (6)  Other assets is primarily comprised of net monoline exposure to a single counterparty and private equity investments. During the six months ended June 30, 2012, the transfers into Level 3 included $932 million of trading account assets and $1.0 billion of long-term debt. Transfers into Level 3 for trading account assets were primarily the result of decreased market liquidity for certain corporate loans and additional information related to certain CLOs. 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 six months ended June 30, 2012, the transfers out of Level 3 included $730 million of trading account assets, $386 million of net derivative assets, $771 million of AFS debt securities, $632 million of LHFS and $1.1 billion 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 and ABS. 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. Level 3 – Fair Value Measurements (1)   Six Months Ended June 30, 2011           Gross       (Dollars in millions) Balance January 1 2011 Consolidation of VIEs Gains (Losses) in Earnings Gains (Losses) in OCI Purchases Sales Issuances Settlements Gross Transfers into Level 3 Gross Transfers out of Level 3 Balance June 30 2011 Trading account assets:                       Corporate securities, trading loans and other (2) $ 7,751 $ — $ 675 $ — $ 3,580 $ (4,537 ) $ — $ (519 ) $ 815 $ (313 ) $ 7,452 Equity securities 623 — 67 — 175 (206 ) — (115 ) 120 (2 ) 662 Non-U.S. sovereign debt 243 — 85 — 122 (15 ) — (3 ) 3 (44 ) 391 Mortgage trading loans and ABS 6,908 — 642 — 1,832 (3,246 ) — (228 ) 1 (390 ) 5,519 Total trading account assets 15,525 — 1,469 — 5,709 (8,004 ) — (865 ) 939 (749 ) 14,024 Net derivative assets (3) 7,745 — 2,245 — 886 (1,260 ) — (4,060 ) 340 (478 ) 5,418 AFS debt securities:                       Mortgage-backed securities:                       Agency 4 — — — — — — — — (4 ) — Agency-collateralized mortgage obligations — — — — 56 — — (1 ) — — 55 Non-agency residential 1,468 — (45 ) (28 ) 2 (290 ) — (289 ) 276 — 1,094 Non-agency commercial 19 — — —   — — (1 ) — — 18 Non-U.S. securities 3 — — — — — — — 88 (3 ) 88 Corporate/Agency bonds 137 — 2 (1 ) 86 (7 ) — — 7 — 224 Other taxable securities 13,018 — 52 62 1,450 (53 ) — (4,155 ) 2 (2 ) 10,374 Tax-exempt securities 1,224 — 6 (33 ) 683 (72 ) — (237 ) 38 — 1,609 Total AFS debt securities 15,873 — 15 — 2,277 (422 ) — (4,683 ) 411 (9 ) 13,462 Loans and leases (2, 4) 3,321 5,194 209 — 21 (376 ) 2,667 (1,444 ) 5 — 9,597 Mortgage servicing rights (4) 14,900 — (2,200 ) — — (234 ) 1,251 (1,345 ) — — 12,372 Loans held-for-sale (2) 4,140 — 185 — 123 (243 ) — (592 ) 441 (42 ) 4,012 Other assets (5) 6,856 — 302 — 172 (1,184 ) — (393 ) 375 (1,633 ) 4,495 Trading account liabilities – Corporate securities and other (7 ) — — — 76 (132 ) — — — — (63 ) Other short-term borrowings (2) (706 ) — (82 ) — — — — 44 — — (744 ) Accrued expenses and other liabilities (2) (828 ) — 64 — — (4 ) (9 ) — — — (777 ) Long-term debt (2) (2,986 ) — (143 ) — 215 (55 ) (249 ) 388 (1,030 ) 536 (3,324 ) (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 $15.2 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 six months ended June 30, 2011, the transfers into Level 3 included $939 million of trading account assets and $1.0 billion of long-term debt. Transfers into Level 3 for trading account assets were primarily driven by certain CLOs which were transferred into Level 3 due to a lack of pricing 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 six months ended June 30, 2011, the transfers out of Level 3 included $749 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 which occurred in the first quarter of 2011. The following tables summarize 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 and six months ended June 30, 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 June 30, 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) $ —   $ 30   $ —   $ —   $ 30 Equity securities —   (6 )   —   —   (6 ) Non-U.S. sovereign debt —   (26 )   —   —   (26 ) Mortgage trading loans and ABS —   (16 )   —   —   (16 ) Total trading account assets —   (18 )   —   —   (18 ) Net derivative assets —   229   881   —   1,110 AFS debt securities:                   Tax-exempt securities —   —   —   28   28 Total AFS debt securities —   —   —   28   28 Loans and leases (2) —   —   —   51   51 Mortgage servicing rights —   —   (1,592 )   —   (1,592 ) Loans held-for-sale (2) —   —   5   5   10 Other assets (21 )   —   (34 )   (47 )   (102 ) Accrued expenses and other liabilities (2) —   —   —   1   1 Long-term debt (2) —   80   —   13   93 Total $ (21 )   $ 291   $ (740 )   $ 51   $ (419 )                       Three Months Ended June 30, 2011 Trading account assets:                   Corporate securities, trading loans and other (2) $ —   $ 181   $ —   $ —   $ 181 Equity securities —   24   —   —   24 Non-U.S. sovereign debt —   80   —   —   80 Mortgage trading loans and ABS —   80   —   —   80 Total trading account assets —   365   —   —   365 Net derivative assets —   556   1,251   —   1,807 AFS debt securities:                   Non-agency residential MBS —   —   —   (29 )   (29 ) Other taxable securities —   —   —   23   23 Tax-exempt securities —   —   —   9   9 Total AFS debt securities —   —   —   3   3 Loans and leases (2) —   —   (13 )   50   37 Mortgage servicing rights —   —   (2,447 )   —   (2,447 ) Loans held-for-sale (2) —   —   (13 )   20   7 Other assets 192   —   (12 )   —   180 Other short-term borrowings (2) —   —   (36 )   —   (36 ) Accrued expenses and other liabilities (2) —   (2 )   74   (151 )   (79 ) Long-term debt (2) —   (10 )   —   15   5 Total $ 192   $ 909   $ (1,196 )   $ (63 )   $ (158 ) (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. Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings   Six Months Ended June 30, 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) $ —   $ 123   $ —   $ —   $ 123 Equity securities —   9   —   —   9 Non-U.S. sovereign debt —   (2 )   —   —   (2 ) Mortgage trading loans and ABS —   83   —   —   83 Total trading account assets —   213   —   —   213 Net derivative assets —   (1,144 )   1,417   —   273 AFS debt securities:                   Non-agency residential MBS —   —   —   (69 )   (69 ) Corporate/Agency bonds —   —   —   (2 )   (2 ) Other taxable securities —   —   —   7   7 Tax-exempt securities —   —   —   54   54 Total AFS debt securities —   —   —   (10 )   (10 ) Loans and leases (2) —   —   —   215   215 Mortgage servicing rights —   —   (937 )   —   (937 ) Loans held-for-sale (2) —   —   95   84   179 Other assets (11 )   —   (42 )   (81 )   (134 ) Accrued expenses and other liabilities (2) —   —   —   4   4 Long-term debt (2) —   (59 )   —   (89 )   (148 ) Total $ (11 )   $ (990 )   $ 533   $ 123   $ (345 )                       Six Months Ended June 30, 2011 Trading account assets:                   Corporate securities, trading loans and other (2) $ —   $ 675   $ —   $ —   $ 675 Equity securities —   67   —   —   67 Non-U.S. sovereign debt —   85   —   —   85 Mortgage trading loans and ABS —   642   —   —   642 Total trading account assets —   1,469   —   —   1,469 Net derivative assets —   97   2,148   —   2,245 AFS debt securities:                   Non-agency residential MBS —   —   —   (45 )   (45 ) Corporate/Agency bonds —   —   —   2   2 Other taxable securities —   12   —   40   52 Tax-exempt securities —   (3 )   —   9   6 Total AFS debt securities —   9   —   6   15 Loans and leases (2) —   —   (13 )   222   209 Mortgage servicing rights —   —   (2,200 )   —   (2,200 ) Loans held-for-sale (2) —   —   (11 )   196   185 Other assets 314   —   (12 )   —   302 Other short-term borrowings (2) —   —   (82 )   —   (82 ) Accrued expenses and other liabilities (2) —   (10 )   74   —   64 Long-term debt (2) —   (102 )   —   (41 )   (143 ) Total $ 314   $ 1,463   $ (96 )   $ 383   $ 2,064 (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 summarize changes in unrealized gains (losses) recorded in earnings during the three and six months ended June 30, 2012 and 2011 for Level 3 assets and liabilities that were still held at June 30, 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 June 30, 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) $ —   $ (30 )   $ —   $ —   $ (30 ) Equity securities —   (6 )   —   —   (6 ) Non-U.S. sovereign debt —   (25 )   —   —   (25 ) Mortgage trading loans and ABS —   (26 )   —   —   (26 ) Total trading account assets —   (87 )   —   —   (87 ) Net derivative assets —   227   571   —   798 Loans and leases (2) —   —   —   51   51 Mortgage servicing rights —   —   (1,722 )   —   (1,722 ) Loans held-for-sale (2) —   —   5   (9 )   (4 ) Other assets (46 )   —   (34 )   (47 )   (127 ) Trading account liabilities – Corporate securities and other —   (2 )   —   —   (2 ) Long-term debt (2) —   82   —   13   95 Total $ (46 )   $ 220   $ (1,180 )   $ 8   $ (998 )                       Three Months Ended June 30, 2011 Trading account assets:                   Corporate securities, trading loans and other (2) $ —   $ (20 )   $ —   $ —   $ (20 ) Equity securities —   (40 )   —   —   (40 ) Non-U.S. sovereign debt —   67   —   —   67 Mortgage trading loans and ABS —   (40 )   —   —   (40 ) Total trading account assets —   (33 )   —   —   (33 ) Net derivative assets —   460   166   —   626 AFS debt securities:                   Non-agency residential MBS —   —   —   (29 )   (29 ) Total AFS debt securities —   —   —   (29 )   (29 ) Mortgage servicing rights —   —   (2,869 )   —   (2,869 ) Loans held-for-sale (2) —   —   (36 )   3   (33 ) Other assets 150   —   (12 )   —   138 Other short-term borrowings (2) —   —   (28 )   —   (28 ) Accrued expenses and other liabilities (2) —   —   —   (174 )   (174 ) Long-term debt (2) —   (10 )   —   3   (7 ) Total $ 150   $ 417   $ (2,779 )   $ (197 )   $ (2,409 ) (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. Level 3 – Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date   Six Months Ended June 30, 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) $ —   $ (7 )   $ —   $ —   $ (7 ) Equity securities —   6   —   —   6 Mortgage trading loans and ABS —   14   —   —   14 Total trading account assets —   13   —   —   13 Net derivative assets —   (1,115 )   934   —   (181 ) Loans and leases (2) —   —   —   217   217 Mortgage servicing rights —   —   (1,252 )   —   (1,252 ) Loans held-for-sale (2) —   —   62   64   126 Other assets (36 )   —   (40 )   (81 )   (157 ) Trading account liabilities – Corporate securities and other —   4   —   —   4 Long-term debt (2) —   (12 )   —   (54 )   (66 ) Total $ (36 )   $ (1,110 )   $ (296 )   $ 146   $ (1,296 )                       Six Months Ended June 30, 2011 Trading account assets:                   Corporate securities, trading loans and other (2) $ —   $ 286   $ —   $ —   $ 286 Equity securities —   (21 )   —   —   (21 ) Non-U.S. sovereign debt —   70   —   —   70 Mortgage trading loans and ABS —   278   —   —   278 Total trading account assets —   613   —   —   613 Net derivative assets —   247   192   —   439 AFS debt securities:                   Non-agency residential MBS —   —   —   (99 )   (99 ) Total AFS debt securities —   —   —   (99 )   (99 ) Loans and leases (2) —   —   —   127   127 Mortgage servicing rights —   —   (2,933 )   —   (2,933 ) Loans held-for-sale (2) —   —   (48 )   91   43 Other assets 137   —   (11 )   —   126 Other short-term borrowings (2) —   —   (61 )   —   (61 ) Accrued expenses and other liabilities (2) —   —   —   (90 )   (90 ) Long-term debt (2) —   (102 )   —   (53 )   (155 ) Total $ 137   $ 758   $ (2,861 )   $ (24 ) — $ (1,990 ) (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 June 30, 2012. Quantitative Information about Level 3 Fair Value Measurements (Dollars in millions)     Inputs Financial Instrument Fair Value Valuation Technique Significant Unobservable Inputs Ranges of Inputs Loans and Securities (1)         Instruments backed by residential real estate assets $ 4,245 Discounted cash flow, Market comparables Yield 1% to 25% Trading account assets – Mortgage trading loans and ABS 784 Prepayment speed 0% to 28% CPR Loans and leases 1,185 Default rate 0% to 54% CDR Loans held-for-sale 2,276 Loss severity 0% to 80% Instruments backed by commercial real estate assets $ 2,438 Discounted cash flow Yield 1% to 10% Trading account assets – Mortgage trading loans and ABS 299 Loss severity 0% to 97% Loans held-for-sale 465     Other assets 1,674     Commercial loans, debt securities and other $ 10,215 Discounted cash flow, Market comparables Yield 0% to 20% Trading account assets – Corporate securities, trading loans and other 2,729 Enterprise value/EBITDA multiple 3x to 7x Trading account assets – Mortgage trading loans and ABS 3,735 Prepayment speed 5% to 25% AFS debt securities – Other taxable securities 3,301 Default rate 1% to 5% Loans and leases 450 Loss severity 25% to 40% Auction rate securities $ 4,127 Discounted cash flow, Market comparables Weighted-average life 5 years Trading account assets – Corporate securities, trading loans and other 1,730 Discount rate LIBOR +200 or JJK +150 AFS debt securities – Other taxable securities 1,257 Projected tender price/Re-financing level 50% to 100% AFS debt securities – Tax-exempt securities 1,140   Structured liabilities         Long-term debt $ (2,388 ) Industry standard derivative pricing (2) Equity correlation 30% to 97%     Long-dated volatilities 20% to 70%     (1)  The categories presented in the table above have been aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 218: Trading account assets – Corporate securities, trading loans and other of $4.5 billion, Trading account assets – Mortgage trading loans and ABS of $4.8 billion, AFS debt securities – Other taxable securities of $4.6 billion, AFS debt securities – Tax-exempt securities of $1.1 billion, Loans and leases of $1.6 billion, LHFS of $2.7 billion and Other assets of $1.7 billion. (2)  Includes models such as Monte Carlo simulation and Black-Scholes. 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 Valuation Technique Significant Unobservable Inputs Ranges of Inputs Net derivatives assets         Credit derivatives $ 4,639 Discounted cash flow, Hazard rate model (1), Stochastic recovery correlation model Yield 0% to 25%     Credit spreads 100 bps to 500 bps     Upfront points 53 points to 99 points     Spread to index -2,000 bps to 2,000 bps     Credit correlation 30% to 80%     Prepayment speed 0% to -28% CPR     Default rate 0% to 5% CDR     Loss severity 0% to 70% Equity derivatives $ (481 ) Industry standard derivative pricing (2) Equity correlation 30% to 97%     Long-dated volatilities 20% to 70%     Commodity derivatives $ (1 ) Discounted cash flow Long-term natural gas basis curve -$0.53 to $0.30 Interest rate derivatives $ 444 Industry standard derivative pricing (2) Correlation (IR/IR) 15% to 100%     Correlation (FX/IR) -65% to 50%     Long-dated inflation rates 1% to 3%     Long-dated inflation volatilities 0% to 1%     Long-dated volatilities (FX) 7% to 38%     Long-dated swap rates 9% to 11% Total net derivative assets $ 4,601       (1)  The hazard rate model is an industry standard model for valuing CDS for single names or indices. (2)  Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates. CPR = Constant Prepayment Rate CDR = Constant Default Rate IR = Interest Rate FX = Foreign Exchange In the tables above, instruments backed by residential and commercial real estate assets include RMBS, commercial mortgage-backed securities, whole loans, mortgage CDOs and net monoline exposure. Commercial loans, debt securities and other include corporate CLOs and CDOs, commercial loans and bonds, and securities backed by non-real estate assets. Structured liabilities primarily include equity-linked notes that are accounted for under the fair value option. In addition to the instruments in the tables above, the Corporation holds $1.5 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 commercial loans, debt securities and other, 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 (ARS), 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 ARS 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 ARS, a significant increase in projected tender price/refinancing levels would result in a significantly higher fair value. Structured Liabilities and Derivatives For credit derivatives, 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 credit 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. Structured credit derivatives, which include tranched portfolio CDS and derivatives with derivative product company (DPC) and monoline counterparties, are impacted by credit correlation, including default and wrong-way correlation. Default correlation is a parameter that describes the degree of dependence among credit default rates within a credit portfolio that underlies a credit derivative instrument. 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. 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 a 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 and 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 holds certain assets that are measured at fair value, but only in certain situations (for example, impairment) and these measurements are referred to herein as nonrecurring. 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 and six months ended June 30, 2012 and 2011, and still held as of the reporting date. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis       June 30, 2012   Three Months Ended June 30, 2012   Six Months Ended June 30, 2012 (Dollars in millions) Level 2   Level 3   Gains (Losses) Assets               Loans held-for-sale $ 683   $ 1,139   $ (66 )   $ (1 ) Loans and leases (1) 27   6,902   (1,213 )   (2,350 ) Foreclosed properties (2) 67   1,305   (65 )   (156 ) Other assets 39   11   (2 )   (2 )                   June 30, 2011   Three Months Ended June 30, 2011   Six Months Ended June 30, 2011 (Dollars in millions) Level 2   Level 3   Gains (Losses) Assets               Loans held-for-sale $ 1,049   $ 1,779   $ (12 )   $ 52 Loans and leases (1) 17   9,437   (1,679 )   (3,097 ) Foreclosed properties (2) —   2,405   (75 )   (147 ) Other assets —   96   (19 )   (23 ) (1)  Gains (losses) represent charge-offs on real estate-secured loans. (2)  Amounts are included in other assets on the Corporation's 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 June 30, 2012. Quantitative Information about Nonrecurring Level 3 Fair Value Measurements (Dollars in millions)     Inputs Financial Instrument Fair Value Valuation Technique Significant Unobservable Inputs Ranges of Inputs Instruments backed by residential real estate assets $ 8,041 Discounted cash flows, Market comparables Yield 4% to 7% Loans held-for-sale 1,139 Prepayment speed 3% to 27% Loans and leases 6,902 Default rate 0% to 61%     Loss severity 0% to 62%     OREO discount 0% to 28%     Cost to sell 8% 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 or, in the case of LHFS, are carried at the lower of cost or fair value. 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.