Fair Value Disclosures

6 Months Ended

Jun. 30, 2011

Note 4. Fair Value Disclosures

Fair Value Accounting

Fair Value Hierarchy

In accordance with Fair Value Accounting, Merrill Lynch has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Financial assets and liabilities recorded on the Condensed Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:


Level 1.	Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that Merrill Lynch has the ability to access (examples include active exchange-traded equity securities, exchange-traded derivatives, U.S. Government securities, and certain other sovereign government obligations).

Level 2.	Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:


	a)	Quoted prices for similar assets or liabilities in active markets (examples include restricted stock and U.S. agency securities);


	b)	Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which can trade infrequently);


	c)	Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and


	d)	Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability (examples include certain residential and commercial mortgage-related assets, including loans, securities and derivatives).

Level 3.

Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s view about the assumptions a market participant would use in pricing the asset or liability (examples include certain private equity investments, certain residential and commercial mortgage-related assets and long-dated or complex derivatives).

As required by Fair Value Accounting, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore gains and losses for such assets and liabilities categorized within the Level 3 reconciliation below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Further, the following reconciliations do not take into consideration the offsetting effect of Level 1 and 2 financial instruments entered into by Merrill Lynch that economically hedge certain exposures to the Level 3 positions.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Level 3 gains and losses represent amounts incurred during the period in which the instrument was classified as Level 3. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or transfers out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur. Refer to the recurring and non-recurring sections within this Note for further information on transfers in and out of Level 3.

Valuation Techniques

The following outlines the valuation methodologies for Merrill Lynch’s material categories of assets and liabilities:

U.S. Government and agencies

U.S. Treasury securities U.S. Treasury securities are valued using quoted market prices and are generally classified as Level 1 in the fair value hierarchy.

U.S. agency securities U.S. agency securities are comprised of two main categories consisting of agency issued debt and mortgage pass-throughs. The fair value of agency issued debt securities is derived using market prices and recent trade activity gathered from independent dealer pricing services or brokers. Mortgage pass-throughs include To-be-announced (“TBA”) securities and mortgage pass-through certificates. TBA securities are generally valued using quoted market prices. Generally, the fair value of mortgage pass-through certificates is based on market prices of comparable securities. Agency issued debt securities and mortgage pass-throughs are generally classified as Level 2 in the fair value hierarchy.

Non-U.S. governments and agencies

Sovereign government obligations Sovereign government obligations are valued using quoted prices in active markets when available. To the extent quoted prices are not available, fair value is determined based on reference to recent trading activity and quoted prices of similar securities. These securities are generally classified in Level 1 or Level 2 in the fair value hierarchy, primarily based on the issuing country.

Municipal debt

Municipal bonds The fair value of municipal bonds is calculated using recent trade activity, market price quotations and new issuance levels. In the absence of this information, fair value is calculated using comparable bond credit spreads. Current interest rates, credit events, and individual bond characteristics such as coupon, call features, maturity, and revenue purpose are considered in the valuation process. The majority of these bonds are classified as Level 2 in the fair value hierarchy.

Auction Rate Securities (“ARS”) Merrill Lynch holds investments in certain ARS, including student loan and municipal ARS. Student loan ARS are comprised of various pools of student loans. Municipal ARS are issued by states and municipalities for a wide variety of purposes, including but not limited to healthcare, industrial development, education and transportation infrastructure. The fair value of the student loan ARS is calculated using a pricing model that relies upon a number of assumptions including weighted average life, coupon, discount margin and liquidity discounts. The fair value of the municipal ARS is calculated based upon projected refinancing and spread assumptions. In both cases, recent trades and issuer tenders are considered in the valuations. Student loan ARS and municipal ARS are classified as Level 3 in the fair value hierarchy.

Corporate and other debt

Corporate bonds Corporate bonds are valued based on either the most recent observable trade and/or external quotes, depending on availability. The most recent observable trade price is given highest priority as the valuation benchmark based on an evaluation of transaction date, size, frequency, and bid-offer. This price may be adjusted by bond or credit default swap spread movement. When credit default swap spreads are referenced, cash-to-synthetic basis magnitude and movement as well as maturity matching are incorporated into the value. When neither external quotes nor a recent trade is available, the bonds are valued using a discounted cash flow approach based on risk parameters of comparable securities. In such cases, the potential pricing difference in spread and/or price terms with the traded comparable is considered. Corporate bonds are generally classified as Level 2 or Level 3 in the fair value hierarchy.

Corporate loans and commitments The fair values of corporate loans and loan commitments are based on market prices and most recent transactions when available. When not available, a discounted cash flow valuation approach is applied using market-based credit spreads of comparable debt instruments, recent new issuance activity or relevant credit derivatives with appropriate cash-to-synthetic basis adjustments. Corporate loans and commitments are generally classified as Level 2 in the fair value hierarchy. Certain corporate loans, particularly those related to emerging market, leveraged and distressed companies have limited price transparency. These loans are generally classified as Level 3 in the fair value hierarchy.

Mortgages, mortgage-backed and asset-backed

Residential Mortgage-Backed Securities (“RMBS”), Commercial Mortgage-Backed Securities (“CMBS”), and other Asset-Backed Securities (“ABS”) RMBS, CMBS and other ABS are valued based on observable price or credit spreads for the particular security, or when price or credit spreads are not observable, the valuation is based on prices of comparable bonds or the present value of expected future cash flows. Valuation levels of RMBS and CMBS indices are used as an additional data point for benchmarking purposes or to price outright index positions.

When estimating the fair value based upon the present value of expected future cash flows, Merrill Lynch uses its best estimate of the key assumptions, including forecasted credit losses, prepayment rates, forward yield curves and discount rates commensurate with the risks involved, while also taking into account performance of the underlying collateral.

RMBS, CMBS and other ABS are classified as Level 3 in the fair value hierarchy if external prices or credit spreads are unobservable or if comparable trades/assets involve significant subjectivity related to property type differences, cash flows, performance and other inputs; otherwise, they are classified as Level 2 in the fair value hierarchy.

Equities

Exchange-Traded Equity Securities Exchange-traded equity securities are generally valued based on quoted prices from the exchange. To the extent these securities are actively traded, they are classified as Level 1 in the fair value hierarchy, otherwise they are classified as Level 2.

Derivative contracts

Listed Derivative Contracts Listed derivatives that are actively traded are generally valued based on quoted prices from the exchange and are classified as Level 1 in the fair value hierarchy. Listed derivatives that are not actively traded are valued using the same approaches as those applied to OTC derivatives; they are generally classified as Level 2 in the fair value hierarchy.

OTC Derivative Contracts OTC derivative contracts include forwards, swaps and options related to interest rate, foreign currency, credit, equity or commodity underlyings.

The fair value of OTC derivatives is derived using market prices and other market based pricing parameters such as interest rates, currency rates and volatilities that are observed directly in the market or gathered from independent sources such as dealer consensus pricing services or brokers. Where models are used, they are used consistently and reflect the contractual terms of and specific risks inherent in the contracts. Generally, the models do not require a high level of subjectivity since the valuation techniques used in the models do not require significant judgment and inputs to the models are readily observable in active markets. When appropriate, valuations are adjusted for various factors such as liquidity and credit considerations based on available market evidence. In addition, for most collateralized interest rate and currency derivatives the requirement to pay interest on the collateral may be considered in the valuation. The majority of OTC derivative contracts are classified as Level 2 in the fair value hierarchy.

OTC derivative contracts that do not have readily observable market based pricing parameters are classified as Level 3 in the fair value hierarchy. Examples of derivative contracts classified within Level 3 include contractual obligations that have tenures that extend beyond periods in which inputs to the model would be observable, exotic derivatives with significant inputs into a valuation model that are less transparent in the market and certain credit default swaps (“CDS”) referenced to mortgage-backed securities.

For example, derivative instruments, such as certain CDS referenced to RMBS, CMBS, ABS and collateralized debt obligations (“CDOs”), may be valued based on the underlying mortgage risk where these instruments are not actively quoted. Inputs to the valuation will include available information on similar underlying loans or securities in the cash market. The prepayments and loss assumptions on the underlying loans or securities are estimated using a combination of historical data, prices on recent market transactions, relevant observable market indices such as the ABX or CMBX and prepayment and default scenarios and analyses.

CDOs The fair value of CDOs is derived from a referenced basket of CDS, the CDO’s capital structure, and the default correlation, which is an input to a proprietary CDO valuation model. The underlying CDO portfolios typically contain investment grade as well as non-investment grade obligors. After adjusting for differences in risk profile, the correlation parameter for an actual transaction is estimated by benchmarking against observable standardized index tranches and other comparable transactions. CDOs are classified as either Level 2 or Level 3 in the fair value hierarchy.

Investment securities non-qualifying

Investments in Private Equity, Real Estate and Hedge Funds Merrill Lynch has investments in numerous asset classes, including: direct private equity, private equity funds, hedge funds and real estate funds. Valuing these investments requires significant management judgment due to the nature of the assets and the lack of quoted market prices and liquidity in these assets. Initially, the transaction price of the investment is generally considered to be the best indicator of fair value. Thereafter, valuation of direct investments is based on an assessment of each individual investment using various methodologies, which include publicly traded comparables derived by multiplying a key performance metric (e.g., earnings before interest, taxes, depreciation and amortization) of the portfolio company by the relevant valuation multiple observed for comparable companies, acquisition comparables, entry level multiples and discounted cash flows. These valuations are subject to appropriate discounts for lack of liquidity or marketability. Certain factors which may influence changes to fair value include but are not limited to, recapitalizations, subsequent rounds of financing, and offerings in the equity or debt capital markets. For fund investments, Merrill Lynch generally records the fair value of its proportionate interest in the fund’s capital as reported by the fund’s respective managers.

Investment securities non-qualifying include equity securities that have recently gone through initial public offerings or secondary sales of public positions. These investments are primarily classified as either Level 1 or Level 2 in the fair value hierarchy. Level 2 classifications generally include those publicly traded equity investments that have a legal or contractual transfer restriction. All other investments in private equity, real estate and hedge funds are classified as Level 3 in the fair value hierarchy due to infrequent trading and/or unobservable market prices.

Resale and repurchase agreements

Merrill Lynch elected the fair value option for certain resale and repurchase agreements. For such agreements, the fair value is estimated using a discounted cash flow model which incorporates inputs such as interest rate yield curves and option volatility. Resale and repurchase agreements for which the fair value option has been elected are generally classified as Level 2 in the fair value hierarchy.

Long-term and short-term borrowings

Merrill Lynch and its consolidated VIEs issue structured notes that have coupons or repayment terms linked to the performance of debt or equity securities, indices, currencies or commodities. The fair value of structured notes is estimated using valuation models for the combined derivative and debt portions of the notes when the fair value option has been elected. These models incorporate observable and in some instances unobservable inputs including security prices, interest rate yield curves, option volatility, currency, commodity or equity rates and correlations between these inputs. The impact of Merrill Lynch’s own credit spreads is also included based on Merrill Lynch’s observed secondary bond market spreads. Structured notes are classified as either Level 2 or Level 3 in the fair value hierarchy.

Recurring Fair Value

The following tables present Merrill Lynch’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2011 and December 31, 2010, respectively.


	Fair Value Measurements on a Recurring Basis
	as of June 30, 2011
							Netting
(dollars in millions)	Level 1		Level 2		Level 3		Adj⁽¹⁾			Total


Assets:
Securities segregated for regulatory purposes or deposited with clearing organizations:
Corporate debt	$	-	$	320	$	-	$	-		$	320
Non-U.S. governments and agencies		-		1,674		-		-			1,674
U.S. Government and agencies		1,073		615		-		-			1,688

Total securities segregated for regulatory purposes or deposited with clearing organizations		1,073		2,609		-		-			3,682

Receivables under resale agreements		-		91,164		-		-			91,164
Receivables under securities borrowed transactions		-		2,175		-		-			2,175
Trading assets, excluding derivative contracts:
Equities		24,576		8,777		163		-			33,516
Convertible debentures		-		5,955		152		-			6,107
Non-U.S. governments and agencies		28,848		2,451		391		-			31,690
Corporate debt		-		20,849		3,846		-			24,695
Preferred stock		-		302		307		-			609
Mortgages, mortgage-backed and asset-backed		-		5,486		4,848		-			10,334
U.S. Government and agencies		24,301		18,886		-		-			43,187
Municipals and money markets		1,165		12,789		2,486		-			16,440
Physical commodities and other		-		774		-		-			774

Total trading assets, excluding derivative contracts		78,890		76,269		12,193		-			167,352

Derivative contracts⁽²⁾		2,737		547,052		11,798		(526,599	)		34,988
Investment securities available-for-sale:
U.S. Treasury securities and agency debentures		398		-		-		-			398
Mortgage-backed securities — Residential MBS		-		397		-		-			397
— Agency CMOs		-		-		55		-			55
— Non-agency MBS		-		441		96		-			537
Non-U.S. securities		594		-		-		-			594
Corporate/Agency bonds		-		-		86		-			86

Total investment securities available-for-sale		992		838		237		-			2,067

Investment securities non-qualifying		3,124		2,870		1,571		-			7,565

Total investment securities		4,116		3,708		1,808		-			9,632

Securities received as collateral		23,067		1,460		-		-			24,527
Loans, notes and mortgages		-		681		1,940		-			2,621
Liabilities:
Payables under repurchase agreements		-		42,453		-		-			42,453
Short-term borrowings		-		4,121		-		-			4,121
Trading liabilities, excluding derivative contracts:
Equities		10,504		3,317		-		-			13,821
Convertible debentures		-		447		-		-			447
Non-U.S. governments and agencies		19,424		754		-		-			20,178
Corporate debt		-		9,983		28		-			10,011
Preferred stock		-		91		23		-			114
U.S. Government and agencies		22,935		3,155		-		-			26,090
Municipals, money markets and other		277		82		3		-			362

Total trading liabilities, excluding derivative contracts		53,140		17,829		54		-			71,023

Derivative contracts⁽²⁾		1,565		551,290		6,697		(527,873	)		31,679
Obligation to return securities received as collateral		23,067		1,460		-		-			24,527
Other payables — interest and other		-		4		108		-			112
Long-term borrowings		-		38,502		2,532		-			41,034


(1)		Represents counterparty and cash collateral netting.
(2)		Refer to Note 6 for product level detail.

During the three months ended June 30, 2011, a private equity investment included within investment securities non-qualifying of approximately $400 million was transferred from Level 2 to Level 1 due the lapse of a contractual transfer restriction on the security.

Level 3 derivative contracts (assets) relate to derivative positions on U.S. ABS CDOs and other mortgage products of $4.6 billion, $2.7 billion of other credit derivatives that incorporate unobservable model valuation inputs, and $4.4 billion of equity, currency, interest rate and commodity derivatives that are long-dated and/or have unobservable model valuation inputs (e.g., unobservable correlation).

Level 3 non-qualifying investment securities primarily relate to certain private equity positions.

Level 3 loans, notes and mortgages primarily relate to residential mortgage and corporate loans.

Level 3 derivative contracts (liabilities) relate to derivative positions on U.S. ABS CDOs and other mortgage products of $1.9 billion, $0.8 billion of other credit derivatives that incorporate unobservable model valuation inputs, and $4.0 billion of equity, currency, interest rate and commodity derivatives that are long-dated and/or have unobservable model valuation inputs (e.g., unobservable correlation).

Level 3 long-term borrowings primarily relate to equity-linked structured notes of $2.0 billion and long-term borrowings of consolidated VIEs of $300 million, both of which have unobservable model valuation inputs (e.g., unobservable correlation).


	Fair Value Measurements on a Recurring Basis
	as of December 31, 2010
							Netting
(dollars in millions)	Level 1		Level 2		Level 3		Adj⁽¹⁾			Total


Assets:
Securities segregated for regulatory purposes or deposited with clearing organizations:
Corporate debt	$	-	$	306	$	-	$	-		$	306
Non-U.S. governments and agencies		1,652		1,402		-		-			3,054
U.S. Government and agencies		1,419		1,413		-		-			2,832

Total securities segregated for regulatory purposes or deposited with clearing organizations		3,071		3,121		-		-			6,192

Receivables under resale agreements⁽²⁾		-		74,255		-		-			74,255
Receivables under securities borrowed transactions		-		1,672		-		-			1,672
Trading assets, excluding derivative contracts:
Equities		20,458		7,673		170		-			28,301
Convertible debentures		-		5,903		-		-			5,903
Non-U.S. governments and agencies		18,393		3,612		243		-			22,248
Corporate debt		-		22,300		4,605		-			26,905
Preferred stock		-		511		287		-			798
Mortgages, mortgage-backed and asset-backed		-		5,247		5,747		-			10,994
U.S. Government and agencies⁽³⁾		17,742		23,636		-		-			41,378
Municipals and money markets		732		11,102		2,327		-			14,161
Physical commodities and other		-		598		-		-			598

Total trading assets, excluding derivative contracts		57,325		80,582		13,379		-			151,286

Derivative contracts⁽⁴⁾		1,622		590,020		14,359		(566,630	)		39,371
Investment securities available-for-sale:
U.S. Treasury securities and agency debentures		430		-		-		-			430
Mortgage-backed securities — residential MBS		-		3,869		-		-			3,869
Mortgage-backed securities — agency CMOs		-		61		-		-			61
Mortgage-backed securities — non-agency MBS		-		518		213		-			731

Total investment securities available-for-sale		430		4,448		213		-			5,091

Investment securities non-qualifying		2,792		690		3,394					6,876

Total investment securities		3,222		5,138		3,607		-			11,967

Securities received as collateral		19,471		892		-		-			20,363
Loans, notes and mortgages		-		1,423		1,891		-			3,314
Liabilities:
Payables under repurchase agreements		-		37,394		-		-			37,394
Short-term borrowings		-		6,472		-		-			6,472
Trading liabilities, excluding derivative contracts:
Equities		11,706		914		-		-			12,620
Convertible debentures		-		1,406		-		-			1,406
Non-U.S. governments and agencies		14,748		957		-		-			15,705
Corporate debt		-		9,500		-		-			9,500
U.S. Government and agencies		19,860		4,887		-		-			24,747
Municipals, money markets and other		224		347		-		-			571

Total trading liabilities, excluding derivative contracts		46,538		18,011		-		-			64,549

Derivatives contracts⁽⁴⁾		1,142		590,138		7,991		(567,074	)		32,197
Obligation to return securities received as collateral		19,471		892		-		-			20,363
Other payables — interest and other		-		39		126		-			165
Long-term borrowings		-		36,818		2,396		-			39,214


(1)		Represents counterparty and cash collateral netting.


(2)		Receivables under resale agreements have been revised from approximately $51 billion (as previously reported) to approximately $74 billion. A similar revision has been made on the balance sheet to the parenthetical disclosure of receivables under resale agreements measured at fair value in accordance with the fair value option election.
(3)		U.S. Government and agencies trading asset amounts shown in Level 1 and Level 2 have been revised from approximately $7 billion and $34 billion, respectively (as previously reported) to approximately $18 billion and $24 billion, respectively.
(4)		Refer to Note 6 for product level detail.

Level 3 derivative contracts (assets) relate to derivative positions on U.S. ABS CDOs and other mortgage products of $5.7 billion, $4.1 billion of other credit derivatives that incorporate unobservable model valuation inputs, and $4.5 billion of equity, currency, interest rate and commodity derivatives that are long-dated and/or have unobservable model valuation inputs (e.g., unobservable correlation).

Level 3 non-qualifying investment securities primarily relate to certain private equity positions.

Level 3 loans, notes and mortgages primarily relate to residential mortgage and corporate loans.

Level 3 derivative contracts (liabilities) relate to derivative positions on U.S. ABS CDOs and other mortgage products of $2.2 billion, $2.0 billion of other credit derivatives that incorporate unobservable model valuation inputs, and $3.8 billion of equity, currency, interest rate and commodity derivatives that are long-dated and/or have unobservable model valuation inputs (e.g., unobservable correlation).

Level 3 long-term borrowings primarily relate to equity-linked structured notes of $1.9 billion that are long-dated and/or have unobservable model valuation inputs (e.g., unobservable correlation).

The following tables provide a summary of changes in Merrill Lynch’s Level 3 financial assets and liabilities for the three and six months ended June 30, 2011 and June 30, 2010.


(dollars in millions)
	Level 3 Financial Assets and Liabilities
	Three Months Ended June 30, 2011
											Total Realized
			Total Realized and Unrealized Gains or (Losses)								and Unrealized
			included in Income								Gains or (Losses)			Unrealized
	Beginning		Principal			Other					included in			Gains to														Transfers		Transfers			Ending
	Balance		Transactions			Revenue			Interest		Income			OCI			Sales			Purchases			Issuances		Settlements			In		Out			Balance


Assets:
Trading assets, excluding derivative contracts:
Equities	$	215	$	1		$	-		$	-	$	1		$	-		$	(38	)	$	48		$	-	$	(63	)	$	-	$	-		$	163
Convertible debentures		119		7			-			-		7			-			(84	)		110			-		-			-		-			152
Non-U.S. governments and agencies		252		80			-			-		80			-			(11	)		74			-		(3	)		3		(4	)		391
Corporate debt		3,998		42			-			-		42			-			(1,027	)		777			-		(69	)		151		(26	)		3,846
Preferred stock		325		19			-			-		19			-			(93	)		27			-		(52	)		81		-			307
Mortgages, mortgage-backed and asset-backed		5,433		55			-			-		55			-			(1,572	)		952			-		(20	)		-		-			4,848
Municipals and money markets		2,350		12			-			-		12			-			(743	)		948			-		(149	)		68		-			2,486

Total trading assets, excluding derivative contracts		12,692		216			-			-		216			-			(3,568	)		2,936			-		(356	)		303		(30	)		12,193

Derivative contracts, net		5,554		284			-			-		284			-			(250	)		296			-		(424	)		-		(359	)		5,101
Investment securities available-for-sale:
Mortgage-backed securities — agency CMOs		56		-			-			-		-			-			-			-			-		(1	)		-		-			55
Mortgage-backed securities — non-agency MBSs		103		-			(6	)		-		(6	)		(3	)		-			2			-		-			-		-			96
Corporate/agency bonds		-		-			-			-		-			-			-			86			-		-			-		-			86

Total investment securities available-for-sale		159		-			(6	)		-		(6	)		(3	)		-			88			-		(1	)		-		-			237

Investment securities non-qualifying		1,095		-			125					125						(48	)		24			-		-			375		-			1,571

Total investment securities		1,254		-			119			-		119			(3	)		(48	)		112			-		(1	)		375		-			1,808

Loans, notes and mortgages		1,993		-			54			9		63			-			(327	)		113			215		(113	)		22		(26	)		1,940
Liabilities:
Trading liabilities, excluding derivative contracts:
Corporate debt		52		(1	)		-			-		(1	)		-			20			(45	)		-		-			-		-			28
Preferred stock		23		-			-			-		-			-			-			-			-		-			-		-			23
Municipals, money markets and other		22		-			-			-		-			-			-			(19	)		-		-			-		-			3

Total trading liabilities, excluding derivative contracts		97		(1	)		-			-		(1	)		-			20			(64	)		-		-			-		-			54

Other payables — interest and other		100		-			1			-		1			-			-			-			9		-			-		-			108
Long-term borrowings		2,364		(10	)		20			-		10			-			55			(50	)		205		(95	)		229		(166	)		2,532

Sales of mortgages, mortgage-backed and asset-backed securities primarily relates to the sale of CDO positions in conjunction with the liquidation of a VIE and sales of collateralized loan obligation (“CLO”) positions due to the unwind of the proprietary trading business. Sales and purchases of municipal securities is primarily due to dealer activity in student loan ARS.

Transfers in for corporate debt are primarily due to corporate bond private placements with limited market activity. Transfers out for net derivative contracts primarily relates to increased price observability for certain equity derivative positions. Transfers in for investment securities non-qualifying are due to a change in the valuation methodology for a private equity fund. Transfers in and out related to long-term borrowings are primarily due to changes in the impact of unobservable inputs on the value of certain equity-linked structured notes.


(dollars in millions)
	Level 3 Financial Assets and Liabilities
	Six Months Ended June 30, 2011
			Total Realized and Unrealized								Total Realized
			Gains or (Losses)								and Unrealized
			included in Income								Gains or (Losses)			Unrealized
	Beginning		Principal			Other					included in			Gains to														Transfers		Transfers			Ending
	Balance		Transactions			Revenue			Interest		Income			OCI			Sales			Purchases			Issuances		Settlements			In		Out			Balance


Assets:
Trading assets, excluding derivative contracts:
Equities	$	170	$	35		$	-		$	-	$	35		$	-		$	(86	)	$	108		$	-	$	(63	)	$	-	$	(1	)	$	163
Convertible debentures		-		7			-			-		7			-			(84	)		229			-		-			-		-			152
Non-U.S. governments and agencies		243		85			-			-		85			-			(15	)		122			-		(3	)		3		(44	)		391
Corporate debt		4,605		327			-			-		327			-			(2,096	)		1,118			-		(108	)		247		(247	)		3,846
Preferred stock		287		28			-			-		28			-			(106	)		30			-		(52	)		120		-			307
Mortgages, mortgage-backed and asset-backed		5,747		384			-			-		384			-			(2,408	)		1,513			-		(39	)		1		(350	)		4,848
Municipals and money markets		2,327		31			-			-		31			-			(1,652	)		1,884			-		(172	)		72		(4	)		2,486

Total trading assets, excluding derivative contracts		13,379		897			-			-		897			-			(6,447	)		5,004			-		(437	)		443		(646	)		12,193

Derivative contracts, net		6,368		27			-			-		27			-			(682	)		633			-		(862	)		299		(682	)		5,101
Investment securities available-for-sale:
Mortgage-backed securities — agency CMOs		-		-			-			-		-			-			-			56			-		(1	)		-		-			55
Mortgage-backed securities — non-agency MBSs		213		-			(15	)		-		(15	)		(22	)		(82	)		2			-		-			-		-			96
Corporate/Agency bonds		-		-			-			-		-			-			-			86			-		-			-		-			86

Total investment securities available-for-sale		213		-			(15	)		-		(15	)		(22	)		(82	)		144			-		(1	)		-		-			237

Investment securities non-qualifying		3,394		-			345			-		345			-			(852	)		46			-		(189	)		375		(1,548	)		1,571

Total investment securities		3,607		-			330			-		330			(22	)		(934	)		190			-		(190	)		375		(1,548	)		1,808

Loans, notes and mortgages		1,891		-			229			17		246			-			(496	)		144			215		(155	)		135		(40	)		1,940
Liabilities:
Trading liabilities, excluding derivative contracts:
Corporate debt		-		(1	)		-			-		(1	)		-			72			(45	)		-		-			-		-			28
Preferred stock		-		-			-			-		-			-			23			-			-		-			-		-			23
Municipals, money markets and other		-		-			-			-		-			-			22			(19	)		-		-			-		-			3

Total trading liabilities, excluding derivative contracts		-		(1	)		-			-		(1	)		-			117			(64	)		-		-			-		-			54

Other payables — interest and other		126		-			25			-		25			-			4			(6	)		9		-			-		-			108
Long-term borrowings		2,396		(102	)		(15	)		-		(117	)		-			55			(112	)		248		(326	)		529		(375	)		2,532

Sales of corporate debt primarily relates to sales of corporate ARS and distressed loans during the first quarter of 2011. Sales of mortgages, mortgage-backed and asset-backed securities primarily relates to the sale of CDO positions in conjunction with the liquidation of a VIE and sales of CLO positions due to the unwind of the proprietary trading business. Sales and purchases of municipal securities is primarily due to dealer activity in student loan ARS. Sales of investment securities non-qualifying relates to the sale of a private equity investment during the first quarter of 2011.

Transfers in for corporate debt are primarily due to corporate bond private placements with limited market activity. Transfers out for corporate debt primarily relates to increased price observability (e.g., trading comparables) for certain corporate bond positions. Transfers out for mortgages, mortgage-backed and asset-backed securities primarily relates to increased price observability for certain RMBS and consumer ABS portfolios. Transfers in for net derivative contracts primarily relates to changes in the valuation methodology for certain CDO positions. Transfers out for net derivative contracts primarily relates to increased price observability for certain equity and credit derivative positions. Transfers in for investment securities non-qualifying are due to a change in the valuation methodology for a private equity fund. Transfers out related to investment securities non-qualifying are due to a private equity investment that underwent an initial public offering during the first quarter of 2011. Transfers in and out related to long-term borrowings are primarily due to changes in the impact of unobservable inputs on the value of certain equity-linked structured notes.


(dollars in millions)
	Level 3 Financial Assets and Liabilities
	Three Months Ended June 30, 2010
			Total Realized and Unrealized Gains or (Losses)								Total Realized and						Purchases,
			included in Income								Unrealized Gains			Unrealized			Issuances
	Beginning		Principal			Other					or (Losses)			Gains to			and			Transfers			Transfers			Ending
	Balance		Transactions			Revenue			Interest		included in Income			OCI			Settlements			In			Out			Balance


Assets:
Trading assets, excluding derivative contracts:
Equities	$	323	$	(18	)	$	-		$	-	$	(18	)	$	-		$	(1	)	$	41		$	-		$	345
Non-U.S. governments and agencies		1,063		(73	)		-			-		(73	)		-			(51	)		4			(3	)		940
Corporate debt		6,280		(55	)		-			-		(55	)		-			(765	)		298			(178	)		5,580
Preferred stock		210		(23	)		-			-		(23	)		-			2			-			(1	)		188
Mortgages, mortgage-backed and asset-backed		7,298		131			-			-		131			-			(684	)		362			(233	)		6,874
Municipals and money markets		2,819		(1	)		-			-		(1	)		-			251			160			(113	)		3,116

Total trading assets, excluding derivative contracts		17,993		(39	)		-			-		(39	)		-			(1,248	)		865			(528	)		17,043

Derivative contracts, net		7,281		(217	)		-			-		(217	)		-			(18	)		(520	)		65			6,591
Investment securities available-for-sale:
Mortgage-backed securities — residential non-agency MBSs		585		-			(47	)		-		(47	)		(25	)		(152	)		3			(12	)		352

Total investment securities available-for-sale		585		-			(47	)		-		(47	)		(25	)		(152	)		3			(12	)		352

Investment securities non-qualifying		3,490		-			848			-		848			-			(210	)		-			-			4,128

Total investment securities		4,075		-			801			-		801			(25	)		(362	)		3			(12	)		4,480

Loans, notes and mortgages		3,532		-			10			45		55			-			(435	)		-			-			3,152
Liabilities:
Trading liabilities, excluding derivative contracts:
Non-U.S. governments and agencies		369		-			2			-		2			-			9			-			(369	)		7

Total trading liabilities, excluding derivative contracts		369		-			2			-		2			-			9			-			(369	)		7

Other liabilities — interest and other		148		-			(19	)		-		(19	)		-			(13	)		-			-			154
Long-term borrowings		4,519		472			113			-		585			-			(249	)		545			(224	)		4,006

Other revenue related to investment securities non-qualifying primarily represents net gains on certain private equity investments.

Transfers in for net derivative contracts are primarily due to a lack of price observability for certain credit default and total return swap liabilities related to CDO positions.

Transfers in and transfers out related to long-term borrowings are primarily due to changes in the impact of unobservable inputs on the value of certain equity-linked structured notes.


(dollars in millions)
	Level 3 Financial Assets and Liabilities
	Six Months Ended June 30, 2010
			Total Realized and Unrealized Gains or (Losses)								Total Realized and						Purchases,
			included in Income								Unrealized Gains			Unrealized			Issuances
	Beginning		Principal			Other					or (Losses)			Gains to			and			Transfers		Transfers			Ending
	Balance		Transactions			Revenue			Interest		included in Income			OCI			Settlements			In		Out			Balance


Assets:
Trading assets, excluding derivative contracts:
Equities	$	351	$	(11	)	$	-		$	-	$	(11	)	$	-		$	5		$	72	$	(72	)	$	345
Non-U.S. governments and agencies		1,142		(155	)		-			-		(155	)		-			(79	)		91		(59	)		940
Corporate debt		6,790		251			-			-		251			-			(1,516	)		652		(597	)		5,580
Preferred stock		562		(25	)		-			-		(25	)		-			(348	)		-		(1	)		188
Mortgages, mortgage-backed and asset-backed		7,294		76			-			-		76			-			(435	)		384		(445	)		6,874
Municipals and money markets		2,148		16			-			-		16			-			(169	)		1,234		(113	)		3,116

Total trading assets, excluding derivative contracts		18,287		152			-			-		152			-			(2,542	)		2,433		(1,287	)		17,043

Derivative contracts, net		6,866		(636	)		-			-		(636	)		-			(153	)		510		4			6,591
Investment securities available-for-sale:
Mortgage-backed securities - residential non-agency MBSs		473		-			(67	)		24		(43	)		(52	)		(69	)		55		(12	)		352

Total investment securities available-for-sale		473		-			(67	)		24		(43	)		(52	)		(69	)		55		(12	)		352

Investment securities non-qualifying		3,696		-			1,211			-		1,211			-			(644	)		-		(135	)		4,128

Total investment securities		4,169		-			1,144			24		1,168			(52	)		(713	)		55		(147	)		4,480

Loans, notes and mortgages		4,115		-			(141	)		91		(50	)		-			(913	)		-		-			3,152
Liabilities:
Trading liabilities, excluding derivative contracts:
Non-U.S. governments and
agencies		386		21			2			-		23			-			24			-		(380	)		7

Total trading liabilities, excluding derivative contracts		386		21			2			-		23			-			24			-		(380	)		7

Other liabilities — interest and other		186		-			11			-		11			-			(21	)		-		-			154
Long-term borrowings		4,683		595			192			-		787			-			203			816		(909	)		4,006

Other revenue related to investment securities non-qualifying primarily represents net gains on certain private equity investments.

Decreases in purchases, issuances and settlements related to corporate debt primarily relates to the sale of certain positions (e.g., ARS) during the first and second quarter of 2010.

Transfers in for municipals and money markets relate to reduced price transparency (e.g., lower trading activity) for municipal ARS. Transfers in and transfers out related to long-term borrowings are primarily due to changes in the impact of unobservable inputs on the value of certain equity-linked structured notes

The following tables provide the portion of gains or losses included in income for the three and six months ended June 30, 2011 and June 30, 2010 attributable to unrealized gains or losses relating to those Level 3 assets and liabilities held at June 30, 2011 and June 30, 2010, respectively.


(dollars in millions)
	Unrealized Gains or (Losses) for Level 3 Assets and Liabilities Still Held
	Three Months Ended June 30, 2011											Six Months Ended June 30, 2011
	Principal			Other								Principal			Other
	Transactions			Revenue			Interest		Total			Transactions			Revenue			Interest		Total


Assets:
Trading assets, excluding derivative contracts:
Equities	$	(61	)	$	-		$	-	$	(61	)	$	(46	)	$	-		$	-	$	(46	)
Convertible debentures		3			-			-		3			3			-			-		3
Non-U.S. governments and agencies		67			-			-		67			70			-			-		70
Corporate debt		(44	)		-			-		(44	)		154			-			-		154
Preferred stock		17			-			-		17			23			-			-		23
Mortgages, mortgage-backed and asset-backed		(42	)		-			-		(42	)		201			-			-		201
Municipals and money markets		(3	)		-			-		(3	)		16			-			-		16

Total trading assets, excluding derivative contracts		(63	)		-			-		(63	)		421			-			-		421

Derivative contracts, net		344			-			-		344			269			-			-		269
Investment securities available-for-sale: Mortgage-backed securities - non-agency MBSs		-			(6	)		-		(6	)		-			(25	)		-		(25	)

Total investment securities available-for- sale		-			(6	)		-		(6	)		-			(25	)		-		(25	)

Investment securities non-qualifying		-			122			-		122			-			92			-		92

Total investment securities		-			116			-		116			-			67			-		67

Loans, notes and mortgages		-			17			-		17			-			185			-		185
Liabilities:
Trading liabilities, excluding derivative contracts:
Corporate debt		(1	)		-			-		(1	)		(1	)		-			-		(1	)

Total trading liabilities, excluding
derivative contracts		(1	)		-			-		(1	)		(1	)		-			-		(1	)

Other payables — interest and other		-			(20	)		-		(20	)		-			2			-		2
Long-term borrowings		(10	)		8			-		(2	)		(102	)		(27	)		-		(129	)


(dollars in millions)
	Unrealized Gains or (Losses) for Level 3 Assets and Liabilities Still Held
	Three Months Ended June 30, 2010											Six Months Ended June 30, 2010
	Principal			Other								Principal			Other
	Transactions			Revenue			Interest		Total			Transactions			Revenue			Interest		Total


Assets:
Trading assets, excluding derivative contracts:
Equities	$	(9	)	$	-		$	-	$	(9	)	$	(23	)	$	-		$	-	$	(23	)
Non-U.S. governments and agencies		(73	)		-			-		(73	)		(156	)		-			-		(156	)
Corporate debt		(105	)		-			-		(105	)		19			-			-		19
Preferred stock		(23	)		-			-		(23	)		(25	)		-			-		(25	)
Mortgages, mortgage-backed and asset-backed		120			-			-		120			56			-			-		56
Municipals and money markets		(1	)		-			-		(1	)		16			-			-		16

Total trading assets, excluding derivative contracts		(91	)		-			-		(91	)		(113	)		-			-		(113	)

Derivative contracts, net		(224	)		-			-		(224	)		(590	)		-			-		(590	)
Investment securities available-for-sale:
Mortgage-backed securities - non-agency MBSs		-			(2	)		-		(2	)		-			(22	)		24		2

Total investment securities available-for- sale		-			(2	)		-		(2	)		-			(22	)		24		2

Investment securities non-qualifying		-			688			-		688			-			482			-		482

Total investment securities		-			686			-		686			-			460			24		484

Loans, notes and mortgages		-			(61	)		-		(61	)		-			(39	)		-		(39	)
Liabilities:
Trading liabilities, excluding derivative contracts:
Non-U.S. governments and agencies		2			-			-		2			-			-			-		-
Mortgages, mortgage-backed and asset-backed		-			-			-		-			61			-			-		61

Total trading liabilities, excluding derivative contracts		2			-			-		2			61			-			-		61

Other payables — interest and other		-			(19	)		-		(19	)		-			11			-		11
Long-term borrowings		384			113			-		497			494			191			-		685

Non-recurring Fair Value

Certain assets and liabilities are measured at fair value on a non-recurring basis and are not included in the tables above. These assets and liabilities primarily include loans and loan commitments held for sale that are reported at lower of cost or fair value and loans held for investment that were initially measured at cost and have been written down to fair value as a result of an impairment. The following tables show the fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2011 and December 31, 2010, respectively.


(dollars in millions)
									Gains/(Losses)			Gains/(Losses)			Gains/(Losses)			Gains/(Losses)
									Three Months			Six Months			Three Months			Six Months
	Non-Recurring Basis								Ended			Ended			Ended			Ended
	as of June 30, 2011								June 30,			June 30,			June 30,			June 30,
	Level 1		Level 2		Level 3		Total		2011			2011			2010			2010


Assets:
Investment securities non-qualifying	$	-	$	-	$	83	$	83	$	(1	)	$	(5	)	$	(13	)	$	(13	)
Loans, notes and mortgages		-		53		426		479		9			44			(115	)		(192	)
Other assets		-		-		105		105		(7	)		(7	)		-			(5	)
Liabilities:
Other payables — interest and other		-		-		21		21		-			(1	)		9			7


(dollars in millions)
	Non-Recurring Basis
	as of December 31, 2010
	Level 1		Level 2		Level 3		Total

Assets:
Investment securities non-qualifying	$	-	$	-	$	85	$	85
Loans, notes and mortgages		-		25		1,280		1,305
Other assets		-		10		35		45
Liabilities:
Other payables — interest and other		-		-		31		31

Loans, notes, and mortgages includes held for sale loans that are carried at the lower of cost or fair value and for which the fair value was below the cost basis at June 30, 2011 and December 31, 2010. It also includes certain impaired held for investment loans where an allowance for loan losses has been calculated based upon the fair value of the loans or collateral. Level 3 assets as of June 30, 2011 and December 31, 2010 primarily relate to commercial real estate loans that are classified as held for sale where there continues to be significant illiquidity in the loan trading and securitization markets.

Other payables — interest and other includes amounts recorded for loan commitments at lower of cost or fair value where the funded loan will be held for sale.

Fair Value Option Election

The fair value option election allows companies to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities. Changes in fair value for assets and liabilities for which the election is made will be recognized in earnings as they occur. The fair value option election is permitted on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. As discussed above, certain of Merrill Lynch’s financial instruments are required to be accounted for at fair value under Investment Accounting and Derivatives Accounting, as well as industry level guidance. For certain financial instruments that are not accounted for at fair value under other applicable accounting guidance, the fair value option election has been made.

The following tables provide information about the line items in the Condensed Consolidated Statements of Earnings where changes in fair values of assets and liabilities, for which the fair value option election has been made, are included for the three and six months ended June 30, 2011 and June 30, 2010.


(dollars in millions)
	Changes in Fair Value For the								Changes in Fair Value For the
	Three Months Ended June 30, 2011,								Six Months Ended June 30, 2011,
	for Items Measured								for Items Measured
	at Fair Value Pursuant								at Fair Value Pursuant
	to the Fair Value Option Election								to the Fair Value Option Election
	Gains/			Gains/		Total			Gains/			Gains/		Total
	(Losses)			(Losses)		Changes			(Losses)			(Losses)		Changes
	Principal			Other		in Fair			Principal			Other		in Fair
	Transactions			Revenues		Value			Transactions			Revenues		Value


Assets:
Receivables under resale agreements	$	87		$	-	$	87		$	28		$	-	$	28
Investment securities		-			1		1			-			30		30
Loans, notes and mortgages		-			1		1			-			139		139
Liabilities:
Payables under repurchase agreements		(8	)		-		(8	)		3			-		3
Short-term borrowings		37			-		37			93			-		93
Other payables — interest and other		-			3		3			-			16		16
Long-term borrowings		(145	)		-		(145	)		(506	)		-		(506	)


(dollars in millions)
	Changes in Fair Value For the									Changes in Fair Value For the
	Three Months Ended June 30, 2010									Six Months Ended June 30, 2010
	for Items Measured									for Items Measured
	at Fair Value Pursuant									at Fair Value Pursuant
	to the Fair Value Option Election									to the Fair Value Option Election
	Gains/			Gains/			Total			Gains/		Gains/			Total
	(Losses)			(Losses)			Changes			(Losses)		(Losses)			Changes
	Principal			Other			in Fair			Principal		Other			in Fair
	Transactions			Revenues			Value			Transactions		Revenues			Value


Assets:
Receivables under resale agreements	$	(6	)	$	-		$	(6	)	$	15	$	-		$	15
Investment securities		-			49			49			-		46			46
Loans, notes and mortgages		-			66			66			-		94			94
Liabilities:
Payables under repurchase agreements		6			-			6			20		-			20
Short-term borrowings		151			-			151			107		-			107
Other payables — interest and other		-			(29	)		(29	)		-		2			2
Long-term borrowings⁽¹⁾		2,582			47			2,629			2,481		(20	)		2,461


(1)		Other revenues primarily represent fair value changes on non-recourse long term borrowings issued by consolidated VIEs.

The following describes the rationale for electing to account for certain financial assets and liabilities at fair value, as well as the impact of instrument-specific credit risk on the fair value.

Resale and repurchase agreements

Merrill Lynch elected the fair value option for certain resale and repurchase agreements. The fair value option election was made based on the tenor of the resale and repurchase agreements, which reflects the magnitude of the interest rate risk. The majority of resale and repurchase agreements collateralized by U.S. Government securities were excluded from the fair value option election as these contracts are generally short-dated and therefore the interest rate risk is not considered significant. Amounts loaned under resale agreements require collateral with a market value equal to or in excess of the principal amount loaned, resulting in minimal credit risk for such transactions.

Loans, notes and mortgages and loan commitments

Merrill Lynch made the fair value option election for certain corporate loans because the loans are risk managed on a fair value basis. Upon the acquisition of Merrill Lynch by Bank of America, Merrill Lynch also made the fair value option election for certain mortgage, corporate, and leveraged loans and loan commitments. The changes in the fair value of loans, notes and mortgages and loan commitments, for which the fair value option was elected, that were attributable to changes in borrower-specific credit risk were not material for the three and six months ended June 30, 2011 and June 30, 2010.

As of June 30, 2011 and December 31, 2010, the aggregate fair value of loans, notes and mortgages for which the fair value option election has been made that were 90 days or more past due was $35 million and $32 million, respectively, and the aggregate fair value of loans, notes, and mortgages that were in non-accrual status was $138 million and $32 million, respectively. As of both June 30, 2011 and December 31, 2010, the unpaid principal amount due exceeded the aggregate fair value of such loans, notes and mortgages that are 90 days or more past due and/or in non-accrual status by $173 million.

Short-term and long-term borrowings

Merrill Lynch made the fair value option election for certain short-term and long-term borrowings that are risk managed on a fair value basis (e.g., structured notes) and/or for which hedge accounting under Derivatives Accounting had been difficult to obtain. The majority of the fair value changes on long-term borrowings are from structured notes with coupon or repayment terms that are linked to the performance of debt and equity securities, indices, currencies or commodities. Excluding (losses) gains for the three and six months ended June 30, 2011 and June 30, 2010 related to changes in Merrill Lynch’s credit spreads, the majority of the (losses) gains for the respective periods are offset by gains (losses) on derivatives that economically hedge these borrowings and that are accounted for at fair value under Derivatives Accounting. The changes in the fair value of liabilities for which the fair value option election was made that were attributable to changes in Merrill Lynch’s credit spreads were gains of approximately $0.1 billion and losses of approximately $0.2 billion for the three and six months ended June 30, 2011, and gains of approximately $1.2 billion and $1.4 billion for the three and six months ended June 30, 2010. Changes in Merrill Lynch specific credit risk are derived by isolating fair value changes due to changes in Merrill Lynch’s credit spreads as observed in the secondary cash market.

The fair value option election was also made for certain non-recourse long-term borrowings and secured borrowings issued by consolidated VIEs. The fair value of these borrowings is not materially affected by changes in Merrill Lynch’s creditworthiness.

The following tables present the difference between fair values and the aggregate contractual principal amounts of receivables under resale agreements, receivables under securities borrowed transactions, loans, notes, and mortgages and long-term borrowings for which the fair value option election has been made as of June 30, 2011 and December 31, 2010.


(dollars in millions)
			Principal
	Fair Value		Amount
	at		Due Upon
	June 30, 2011		Maturity		Difference


Assets:
Receivables under resale agreements	$	91,164	$	90,859	$	305
Receivables under securities borrowed transactions		2,175		2,269		(94	)
Loans, notes and mortgages		2,621		3,962		(1,341	)
Liabilities:
Long-term borrowings⁽¹⁾		41,034		43,224		(2,190	)


(1)		The majority of the difference relates to the impact of the widening of Merrill Lynch’s credit spreads since issuance and the change in fair value of non-recourse debt issued by consolidated VIEs.


(dollars in millions)
			Principal
	Fair Value		Amount
	at		Due Upon
	December 31, 2010		Maturity		Difference


Assets:
Receivables under resale agreements⁽¹⁾	$	74,255	$	73,941	$	314
Receivables under securities borrowed transactions		1,672		1,672		-
Loans, notes and mortgages		3,190		4,518		(1,328	)
Liabilities:
Long-term borrowings⁽²⁾		39,214		43,014		(3,800	)


(1)		The fair value and principal amount due upon maturity of receivables under resale agreements have been revised from approximately $51 billion for each (as previously reported) to approximately $74 billion.

(2)		The majority of the difference relates to the impact of the widening of Merrill Lynch’s credit spreads since issuance and the change in fair value of non-recourse debt issued by consolidated VIEs.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 28
-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612

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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
-Subparagraph a-d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 21
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

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-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

MERRILL LYNCH & CO., INC. 10-Q