Bank of America 2008 Annual Report Download - page 52

Table 8 Special Purpose Entities Liquidity Exposure
December 31, 2008
VIEs QSPEs
(Dollars in millions) Consolidated
(1)
Unconsolidated Unconsolidated Total
Commercial paper conduits
Multi-seller conduits $11,304 $41,635 $ – $ 52,939
Asset acquisition conduits 1,121 2,622 – 3,743
Other corporate conduits – – 1,578 1,578
Home equity securitizations
(2)
– – 13,064 13,064
Municipal bond trusts 396 3,872 2,921 7,189
Customer-sponsored conduits – 980 – 980
Credit card securitizations – – 946 946
Collateralized debt obligation vehicles
(3)
– 542 – 542
Total liquidity exposure $12,821 $49,651 $18,509 $ 80,981
December 31, 2007
VIEs QSPEs
(Dollars in millions) Consolidated
(1)
Unconsolidated Unconsolidated Total
Commercial paper conduits
Multi-seller conduits $16,984 $47,335 $ – $ 64,319
Asset acquisition conduits 1,623 6,399 – 8,022
Other corporate conduits – – 4,263 4,263
Municipal bond trusts 7,359 3,120 2,988 13,467
Customer-sponsored conduits – 1,724 – 1,724
Collateralized debt obligation vehicles
(3)
3,240 9,026 – 12,266
Total liquidity exposure $29,206 $67,604 $ 7,251 $104,061
(1) We consolidate VIEs when we are the primary beneficiary and absorb the majority of the expected losses or expected residual returns of the VIEs or both.
(2) Home equity securitizations were added in connection with the Countrywide acquisition.
(3) For additional information on our CDO exposures at December 31, 2008 and 2007 and related writedowns, see the CDO discussion beginning on page 41.
The table above presents our liquidity exposure to these consolidated
and unconsolidated SPEs, which include VIEs and QSPEs. VIEs are SPEs
which lack sufficient equity at risk or whose equity investors do not have
a controlling financial interest. QSPEs are SPEs whose activities are
strictly limited to holding and servicing financial assets. Liquidity
commitments to Corporation-sponsored VIEs and other VIEs in which the
Corporation holds a variable interest are disclosed in Note 9 – Variable
Interest Entities to the Consolidated Financial Statements.
At December 31, 2008 the Corporation’s total liquidity exposure to
SPEs was $81.0 billion, a decrease of $23.1 billion from December 31,
2007. The decrease was attributable to lower liquidity exposure in all
categories, primarily CDOs and multi-seller conduits, partially offset by the
addition of Countrywide’s home equity securitizations.
Multi-Seller Conduits
We administer four multi-seller conduits, three of which are uncon-
solidated, which provide a low-cost funding alternative to our customers
by facilitating their access to the commercial paper market. These con-
duits are discussed in more detail in Note 9 – Variable Interest Entities to
the Consolidated Financial Statements.
Due to the market disruptions, the conduits experienced difficulties in
issuing commercial paper during certain periods of 2008. At
December 31, 2008, we held $2 million of commercial paper issued by
the conduits, including $1 million issued by the unconsolidated conduits
in trading account assets. We did not hold any commercial paper issued
by the conduits at December 31, 2007.
Asset Acquisition Conduits
We administer three commercial paper conduits which acquire assets on
behalf of the Corporation or our customers and obtain funding through the
issuance of commercial paper and subordinated securities to third par-
ties. Repayment of the commercial paper and certificates is assured by
total return swap contracts between us and the conduits. With respect to
two of the conduits, which are unconsolidated, we are reimbursed through
total return swap contracts with our customers. These conduits are dis-
cussed in more detail in Note 9 – Variable Interest Entities to the Con-
solidated Financial Statements.
Due to the market disruptions, the conduits experienced difficulties in
issuing commercial paper during certain periods of 2008. The Corporation
held $1 million and $27 million of commercial paper and certificates
issued by the conduits in trading account assets at December 31, 2008
and 2007.
Other Corporate Conduits
We administer several other corporate conduits that hold primarily high-
grade, long-term municipal, corporate, and mortgage-backed securities.
These conduits obtain funding by issuing commercial paper to third party
investors. We have entered into derivative contracts which provide inter-
est rate, currency and a pre-specified amount of credit protection to the
entities in exchange for the commercial paper rate. These conduits are
discussed in more detail in Note 9 – Variable Interest Entities to the
Consolidated Financial Statements.
Due to the market disruptions, these conduits experienced difficulties
in issuing commercial paper during certain periods of 2008 and at
December 31, 2008, we held $145 million of the commercial paper in
trading account assets. We did not hold any commercial paper issued by
the conduits at December 31, 2007.
Home Equity Securitizations
We evaluate all of our home equity securitizations for their potential to
experience a rapid amortization event by estimating the amount and tim-
ing of future losses on the underlying loans and the excess spread
50 Bank of America 2008