XML 55 R24.htm IDEA: XBRL DOCUMENT v3.22.0.1
Variable Interest Entities and Securitization Activities
12 Months Ended
Dec. 31, 2021
Variable Interest Entities and Securitization Activities [Abstract]  
Variable Interest Entities and Securitization Activities Variable Interest Entities and Securitization Activities
Overview
The Firm is involved with various SPEs in the normal course of business. In most cases, these entities are deemed to be VIEs.
The Firm’s variable interests in VIEs include debt and equity interests, commitments, guarantees, derivative instruments and certain fees. The Firm’s involvement with VIEs arises primarily from:
Interests purchased in connection with market-making activities, securities held in its Investment securities portfolio and retained interests held as a result of securitization activities, including re-securitization transactions.
Guarantees issued and residual interests retained in connection with municipal bond securitizations.
Loans made to and investments in VIEs that hold debt, equity, real estate or other assets.
Derivatives entered into with VIEs.
Structuring of CLNs or other asset-repackaging notes designed to meet the investment objectives of clients.
Other structured transactions designed to provide tax-efficient yields to the Firm or its clients.
The Firm determines whether it is the primary beneficiary of a VIE upon its initial involvement with the VIE and reassesses whether it is the primary beneficiary on an ongoing basis as long as it has any continuing involvement with the VIE. This determination is based upon an analysis of the design of the VIE, including the VIE’s structure and activities, the power to make significant economic decisions held by the Firm and by other parties, and the variable interests owned by the Firm and other parties.
The power to make the most significant economic decisions may take a number of different forms in different types of
VIEs. The Firm considers servicing or collateral management decisions as representing the power to make the most significant economic decisions in transactions such as securitizations or CDOs. As a result, the Firm does not consolidate securitizations or CDOs for which it does not act as the servicer or collateral manager unless it holds certain other rights to replace the servicer or collateral manager or to require the liquidation of the entity. If the Firm serves as servicer or collateral manager, or has certain other rights described in the previous sentence, the Firm analyzes the interests in the VIE that it holds and consolidates only those VIEs for which it holds a potentially significant interest in the VIE.
For many transactions, such as re-securitization transactions, CLNs and other asset-repackaging notes, there are no significant economic decisions made on an ongoing basis. In these cases, the Firm focuses its analysis on decisions made prior to the initial closing of the transaction and at the termination of the transaction. The Firm concluded in most of these transactions that decisions made prior to the initial closing were shared between the Firm and the initial investors based upon the nature of the assets, including whether the assets were issued in a transaction sponsored by the Firm and the extent of the information available to the Firm and to investors, the number, nature and involvement of investors, other rights held by the Firm and investors, the standardization of the legal documentation and the level of continuing involvement by the Firm, including the amount and type of interests owned by the Firm and by other investors. The Firm focused its control decision on any right held by the Firm or investors related to the termination of the VIE. Most re-securitization transactions, CLNs and other asset-repackaging notes have no such termination rights.
Consolidated VIE Assets and Liabilities by Type of Activity1
 At December 31, 2021At December 31, 2020
$ in millionsVIE AssetsVIE LiabilitiesVIE AssetsVIE Liabilities
MABS2
$1,177 $409 $590 $17 
Investment vehicles3
717 294 776 355 
Operating entities508 39 504 39 
Other510 286 248 
Total$2,912 $1,028 $2,118 $414 
1.Certain prior period amounts have been reclassified to conform to the current presentation.
2.Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets and may be in loan or security form. The value of assets is determined based on the fair value of the liabilities and the interests owned by the Firm in such VIEs as the fair values for the liabilities and interests owned are more observable.
3.Amounts include investment funds and CLOs.
Consolidated VIE Assets and Liabilities by Balance Sheet Caption
$ in millions
At
December 31, 2021
At
December 31, 2020
Assets
Cash and cash equivalents$341 $269 
Trading assets at fair value1,965 1,445 
Investment securities37 — 
Securities purchased under agreements to resell200 — 
Customer and other receivables31 23 
Intangible assets85 98 
Other assets253 283 
Total$2,912 $2,118 
Liabilities
Other secured financings$767 $366 
Other liabilities and accrued expenses261 48 
Total$1,028 $414 
Noncontrolling interests$115 $196 
Consolidated VIE assets and liabilities are presented in the previous tables after intercompany eliminations. Generally, most assets owned by consolidated VIEs cannot be removed unilaterally by the Firm and are not available to the Firm while the related liabilities issued by consolidated VIEs are non-recourse to the Firm. However, in certain consolidated VIEs, the Firm either has the unilateral right to remove assets or provides additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.
In general, the Firm’s exposure to loss in consolidated VIEs is limited to losses that would be absorbed on the VIE net assets recognized in its financial statements, net of amounts absorbed by third-party variable interest holders.
Non-consolidated VIEs
 At December 31, 2021
$ in millions
MABS1
CDOMTOBOSF
Other2
VIE assets (UPB)$146,071 $667 $6,089 $2,086 $52,111 
Maximum exposure to loss3
Debt and equity interests
$18,062 $129 $ $1,459 $10,339 
Derivative and other contracts
  4,100  5,599 
Commitments, guarantees and other771    1,005 
Total$18,833 $129 $4,100 $1,459 $16,943 
Carrying value of variable interests—Assets
Debt and equity interests
$18,062 $129 $ $1,459 $10,339 
Derivative and other contracts
  5  2,006 
Total$18,062 $129 $5 $1,459 $12,345 
Additional VIE assets owned4
$15,392 
Carrying value of variable interests—Liabilities
Derivative and other contracts
$ $ $ $ $362 
 At December 31, 2020
$ in millions
MABS1
CDOMTOBOSF
Other2
VIE assets (UPB)$184,153 $3,527 $6,524 $2,161 $48,241 
Maximum exposure to loss3
Debt and equity interests
$26,247 $257 $— $1,187 $11,008 
Derivative and other contracts
— — 4,425 — 5,639 
Commitments, guarantees and other
929 — — — 749 
Total$27,176 $257 $4,425 $1,187 $17,396 
Carrying value of variable interests—Assets
Debt and equity interests
$26,247 $257 $— $1,187 $11,008 
Derivative and other contracts
— — — 851 
Total$26,247 $257 $$1,187 $11,859 
Additional VIE assets owned4
$20,019 
Carrying value of variable interests—Liabilities
Derivative and other contracts
$— $— $— $— $222 
MTOB—Municipal tender option bonds
1.Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets, and may be in loan or security form.
2.Other primarily includes exposures to commercial real estate property and investment funds.
3.Where notional amounts are utilized in quantifying the maximum exposure related to derivatives, such amounts do not reflect changes in fair value recorded by the Firm.
4.Additional VIE assets owned represents the carrying value of total exposure to non-consolidated VIEs for which the maximum exposure to loss is less than specific thresholds, primarily interests issued by securitization SPEs. The Firm’s maximum exposure to loss generally equals the fair value of the assets owned. These assets are primarily included in Trading assets and Investment securities and are measured at fair value (see Note 5). The Firm does not provide additional support in these transactions through contractual facilities, guarantees or similar derivatives.
The majority of the VIEs included in the previous tables are sponsored by unrelated parties; examples of the Firm’s involvement with these VIEs include its secondary market-making activities and the securities held in its Investment securities portfolio (see Note 8).
The Firm’s maximum exposure to loss is dependent on the nature of the Firm’s variable interest in the VIE and is limited to the notional amounts of certain liquidity facilities and other credit support, total return swaps and written put options, as well as the fair value of certain other derivatives and investments the Firm has made in the VIE.
The Firm’s maximum exposure to loss in the previous tables does not include the offsetting benefit of hedges or any reductions associated with the amount of collateral held as part of a transaction with the VIE or any party to the VIE directly against a specific exposure to loss.
Liabilities issued by VIEs generally are non-recourse to the Firm.
Detail of Mortgage- and Asset-Backed Securitization Assets
 At December 31, 2021At December 31, 2020
$ in millionsUPBDebt and
Equity
Interests
UPBDebt and
Equity
Interests
Residential mortgages$15,216 $2,182 $17,775 $3,175 
Commercial mortgages68,503 4,092 62,093 4,131 
U.S. agency collateralized
mortgage obligations
57,972 9,835 99,182 17,224 
Other consumer or commercial loans
4,380 1,953 5,103 1,717 
Total$146,071 $18,062 $184,153 $26,247 
Securitization Activities
In a securitization transaction, the Firm transfers assets (generally commercial or residential mortgage loans or securities) to an SPE, sells to investors most of the beneficial interests, such as notes or certificates, issued by the SPE, and, in many cases, retains other beneficial interests. The purchase of the transferred assets by the SPE is financed through the sale of these interests.
In many securitization transactions involving commercial mortgage loans, the Firm transfers a portion of the assets to the SPE with unrelated parties transferring the remaining assets. In addition, mainly in securitization transactions involving residential mortgage loans, the Firm may also enter into derivative transactions, primarily interest rate swaps or interest rate caps, with the SPE.
Although not obligated, the Firm generally makes a market in the securities issued by SPEs in securitization transactions. As a market maker, the Firm offers to buy these securities from, and sell these securities to, investors. Securities purchased through these market-making activities are not considered to be retained interests; these beneficial interests generally are included in Trading assets—Corporate and other debt and are measured at fair value.
The Firm enters into derivatives, generally interest rate swaps and interest rate caps, with a senior payment priority in many securitization transactions. The risks associated with these and similar derivatives with SPEs are essentially the same as similar derivatives with non-SPE counterparties and are managed as part of the Firm’s overall exposure. See Note 7 for further information on derivative instruments and hedging activities.
Investment Securities
The Firm holds securities issued by VIEs within the Investment securities portfolio. These securities are composed of those related to transactions sponsored by the federal mortgage agencies and predominantly the most senior securities issued by VIEs backed by student loans and commercial mortgage loans. Transactions sponsored by the federal mortgage agencies include an explicit or implicit guarantee provided by the U.S. government. Additionally, the Firm holds certain commercial mortgage-backed securities issued by VIEs retained as a result of the Firm's securitization activities. See Note 8 for further information on the Investment securities portfolio.
Municipal Tender Option Bond Trusts
In a municipal tender option bond trust transaction, the client transfers a municipal bond to a trust. The trust issues short-term securities that the Firm, as the remarketing agent, sells to investors. The client generally retains a residual interest. The short-term securities are supported by a liquidity facility pursuant to which the investors may put their short-term interests. In most programs, a third-party provider will
provide such liquidity facility; in some programs, the Firm provides this liquidity facility.
The Firm may, in lieu of purchasing short-term securities for remarketing, decide to extend a temporary loan to the trust. The client can generally terminate the transaction at any time. The liquidity provider can generally terminate the transaction upon the occurrence of certain events. When the transaction is terminated, the municipal bond is generally sold or returned to the client. Any losses suffered by the liquidity provider upon the sale of the bond are the responsibility of the client. This obligation is generally collateralized. Liquidity facilities provided to municipal tender option bond trusts are classified as derivatives. The Firm consolidates any municipal tender option bond trusts in which it holds the residual interest.
Credit Protection Purchased through Credit-Linked Notes
CLN transactions are designed to provide investors with exposure to certain credit risk on referenced assets. In these transactions, the Firm transfers assets (generally high-quality securities or money market investments) to an SPE, enters into a derivative transaction in which the SPE sells protection on an unrelated referenced asset or group of assets, through a credit derivative, and sells the securities issued by the SPE to investors. In some transactions, the Firm may also enter into interest rate or currency swaps with the SPE. Depending on the structure, the assets and liabilities of the SPE may be consolidated and recognized in the Firm’s balance sheet or accounted for as a sale of assets.
Upon the occurrence of a credit event related to the referenced asset, the SPE will deliver securities collateral as payment to the Firm, which exposes the Firm to changes in the collateral’s value.
Derivative payments by the SPE are collateralized. The risks associated with these and similar derivatives with SPEs are essentially the same as those with non-SPE counterparties and are managed as part of the Firm’s overall exposure.
Other Structured Financings
The Firm invests in interests issued by entities that develop and own low-income communities (including low-income housing projects) and entities that construct and own facilities that will generate energy from renewable resources. The interests entitle the Firm to a share of tax credits and tax losses generated by these projects. In addition, the Firm has issued guarantees to investors in certain low-income housing funds. The guarantees are designed to return an investor’s contribution to a fund and the investor’s share of tax losses and tax credits expected to be generated by the fund. The Firm is also involved with entities designed to provide tax-efficient yields to the Firm or its clients.
Collateralized Loan and Debt Obligations
CLOs and CDOs are SPEs that purchase a pool of assets consisting of corporate loans, corporate bonds, ABS or
synthetic exposures on similar assets through derivatives and issue multiple tranches of debt and equity securities to investors. The Firm underwrites the securities issued in certain CLO transactions on behalf of unaffiliated sponsors and provides advisory services to these unaffiliated sponsors. The Firm sells corporate loans to many of these SPEs, in some cases representing a significant portion of the total assets purchased. Although not obligated, the Firm generally makes a market in the securities issued by SPEs in these transactions and may retain unsold securities. These beneficial interests are included in Trading assets and are measured at fair value.
Equity-Linked Notes
ELN transactions are designed to provide investors with exposure to certain risks related to the specific equity security, equity index or other index. In an ELN transaction, the Firm typically transfers to an SPE either a note issued by the Firm, the payments on which are linked to the performance of a specific equity security, equity index or other index, or debt securities issued by other companies and a derivative contract, the terms of which will relate to the performance of a specific equity security, equity index or other index. These ELN transactions with SPEs were not consolidated at December 31, 2021 or December 31, 2020.
Transferred Assets with Continuing Involvement
 At December 31, 2021
$ in millionsRMLCMLU.S. Agency
CMO
CLN and
Other1
SPE assets (UPB)2
$6,802 $94,276 $28,697 $13,121 
Retained interests
Investment grade$72 $638 $465 $ 
Non-investment grade19 586  69 
Total$91 $1,224 $465 $69 
Interests purchased in the secondary market
Investment grade$18 $118 $33 $ 
Non-investment grade38 53  4 
Total$56 $171 $33 $4 
Derivative assets $ $ $ $891 
Derivative liabilities    284 
 At December 31, 2020
$ in millionsRMLCMLU.S. Agency
CMO
CLN and
Other1
SPE assets (UPB)2
$7,515 $84,674 $21,061 $12,978 
Retained interests
Investment grade$49 $822 $615 $— 
Non-investment grade16 195 — 114 
Total$65 $1,017 $615 $114 
Interests purchased in the secondary market
Investment grade$— $96 $116 $— 
Non-investment grade43 80 — 21 
Total$43 $176 $116 $21 
Derivative assets $— $— $— $400 
Derivative liabilities — — — 436 
 Fair Value at December 31, 2021
$ in millionsLevel 2Level 3Total
Retained interests
Investment grade$536 $2 $538 
Non-investment grade40 40 80 
Total$576 $42 $618 
Interests purchased in the secondary market
Investment grade$168 $1 $169 
Non-investment grade70 25 95 
Total$238 $26 $264 
Derivative assets$891 $ $891 
Derivative liabilities194 90 284 
 Fair Value at December 31, 2020
$ in millionsLevel 2Level 3Total
Retained interests
Investment grade$663 $— $663 
Non-investment grade63 69 
Total$669 $63 $732 
Interests purchased in the secondary market
Investment grade$196 $16 $212 
Non-investment grade62 82 144 
Total$258 $98 $356 
Derivative assets$388 $12 $400 
Derivative liabilities435 436 
RML—Residential mortgage loans
CML—Commercial mortgage loans
1.Amounts include CLO transactions managed by unrelated third parties.
2.Amounts include assets transferred by unrelated transferors.
The previous tables include transactions with SPEs in which the Firm, acting as principal, transferred financial assets with continuing involvement and received sales treatment. The transferred assets are carried at fair value prior to securitization, and any changes in fair value are recognized in the income statement. The Firm may act as underwriter of the beneficial interests issued by these securitization vehicles, for which Investment banking revenues are recognized. The Firm may retain interests in the securitized financial assets as one or more tranches of the securitization. These retained interests are generally carried at fair value in the balance sheet with changes in fair value recognized in the income statement. Fair value for these interests is measured using techniques that are consistent with the valuation techniques applied to the Firm’s major categories of assets and liabilities as described in Notes 2 and 5. Further, as permitted by applicable guidance, certain transfers of assets where the Firm’s only continuing involvement is a derivative are only reported in the following Assets Sold with Retained Exposure table.
Proceeds from New Securitization Transactions and Sales of Loans
$ in millions202120202019
New transactions1
$57,528 $51,814 $34,464 
Retained interests8,822 9,346 7,403 
Sales of corporate loans to CLO SPEs1, 2
169 763 
1.Net gains on new transactions and sales of corporate loans to CLO entities at the time of the sale were not material for all periods presented.
2.Sponsored by non-affiliates.
The Firm has provided, or otherwise agreed to be responsible for, representations and warranties regarding certain assets
transferred in securitization transactions sponsored by the Firm (see Note 15).
Assets Sold with Retained Exposure
$ in millionsAt
December 31,
2021
At
December 31,
2020
Gross cash proceeds from sale of assets1
$67,930 $45,051 
Fair value
Assets sold$68,992 $46,609 
Derivative assets recognized in the balance sheet1,195 1,592 
Derivative liabilities recognized in the balance sheet132 64 
1.The carrying value of assets derecognized at the time of sale approximates gross cash proceeds.
The Firm enters into transactions in which it sells securities, primarily equities, and contemporaneously enters into bilateral OTC derivatives with the purchasers of the securities, through which it retains exposure to the sold securities.