Bank of America 2008 Annual Report Download - page 146

Note 9 – Variable Interest Entities
In addition to the securitization vehicles described in Note 8 – Securitiza-
tions and Note 21 – Mortgage Servicing Rights to the Consolidated Finan-
cial Statements, which are typically structured as QSPEs, the Corporation
utilizes SPEs in the ordinary course of business to support its own and its
customers’ financing and investing needs. These SPEs are typically struc-
tured as VIEs and are thus subject to consolidation by the reporting
enterprise that absorbs the majority of the economic risks and rewards of
the VIE. To determine whether it must consolidate a VIE, the Corporation
qualitatively analyzes the design of the VIE to identify the creators of
variability within the VIE, including an assessment as to the nature of the
risks that are created by the assets and other contractual arrangements
of the VIE, and identifies whether it will absorb a majority of that varia-
bility.
In addition to the VIEs discussed below, the Corporation uses VIEs
such as trust preferred securities trusts in connection with its funding
activities, as described in more detail in Note 12 – Short-term Borrowings
and Long-term Debt to the Consolidated Financial Statements. The Corpo-
ration also uses VIEs in the form of synthetic securitization vehicles to
mitigate a portion of the credit risk on its residential mortgage loan portfo-
lio as described in Note 6 –Outstanding Loans and Leases to the Con-
solidated Financial Statements. The Corporation has also provided
support to or has loss exposure resulting from its involvement with other
VIEs, including certain cash funds managed within Global Wealth and
Investment Management (GWIM), as described in more detail in Note 13
– Commitments and Contingencies to the Consolidated Financial State-
ments.
On December 31, 2008, the Corporation adopted FSP FAS 140-4 and
FIN 46(R)-8 which requires additional disclosures about its involvement
with consolidated and unconsolidated VIEs and expanded the population
of VIEs to be disclosed. For example, an unconsolidated customer vehicle
that was sponsored by the Corporation is now included in the disclosures
because the Corporation has a variable interest in the vehicle, even
though that interest is not a significant variable interest. The following
disclosures incorporate these requirements.
The table below presents the assets and liabilities of VIEs which have
been consolidated on the Corporation’s Balance Sheet at December 31,
2008, total assets of consolidated VIEs at December 31, 2007, and the
Corporation’s maximum exposure to loss resulting from its involvement
with consolidated VIEs as of December 31, 2008 and 2007. The Corpo-
ration’s maximum exposure to loss is based on the unlikely event that all
of the assets in the VIEs become worthless and incorporates not only
potential losses associated with assets recorded on the Corporation’s
Balance Sheet but also potential losses associated with off-balance
sheet commitments such as unfunded liquidity commitments and other
contractual arrangements.
Consolidated VIEs
(Dollars in millions)
Multi-Seller
Conduits
Asset
Acquisition
Conduits
Municipal
Bond Trusts CDOs
Leveraged
Lease Trusts
Other
Vehicles Total
Consolidated VIEs, December 31, 2008 (1)
Maximum loss exposure
(2)
$11,304 $1,121 $ 343 $2,443 $5,774 $3,222 $24,207
Consolidated Assets
(3)
Trading account assets $ – $ 188 $ 343 $ – $ – $ – $ 531
Derivative assets – 931 – – – – 931
Available-for-sale debt securities 7,771 – – 2,443 – 1,945 12,159
Held-to-maturity debt securities 605 – – – – – 605
Loans and leases – – – – 5,829 1,251 7,080
All other assets 992 2 – – – 1,420 2,414
Total $ 9,368 $1,121 $ 343 $2,443 $5,829 $4,616 $23,720
Consolidated Liabilities
Commercial paper and other short-term borrowings $ 9,623 $1,121 $ 396 $ – $ – $1,626 $12,766
All other liabilities 53 – – – 55 582 690
Total $ 9,676 $1,121 $ 396 $ – $ 55 $2,208 $13,456
Consolidated VIEs, December 31, 2007 (1)
Maximum loss exposure
(2)
$16,984 $2,003 $7,646 $4,311 $6,236 $4,247 $41,427
Total assets
(3)
11,944 2,003 7,646 4,464 6,236 5,671 37,964
(1) Cash flows generated by the assets of the consolidated VIEs must generally be used to settle the specific obligations of the VIEs before they are available to the Corporation for general purposes.
(2) Maximum loss exposure for consolidated VIEs includes on-balance sheet assets, net of non-recourse liabilities, plus off-balance sheet exposures. It does not include losses previously recognized through write-downs of
assets.
(3) Total assets of consolidated VIEs are reported net of intercompany balances that have been eliminated in consolidation.
144 Bank of America 2008