Credit ratings The credit ratings of JPMorgan Chase’s parent holding company and each of its significant banking subsidiaries as of December 31, 2007, were as follows.
## Table 0 ##
On February 14, 2007, S&P raised the senior long-term debt ratings on JPMorgan Chase & Co.  and the principal bank subsidiaries to “AA-” and “AA”, respectively, from “A+” and “AA-”, respectively.
S&P also raised the short-term debt rating of JPMorgan Chase & Co.  to “A-1+” from “A-1”.
On February 16, 2007, Fitch raised the senior long-term debt ratings on JPMorgan Chase & Co.  and the principal bank subsidiaries to “AA-” from “A+”.
Fitch also raised the short-term debt rating of JPMorgan Chase & Co.  to “F1+” from “F1”.
On March 2, 2007, Moody’s raised the senior long-term debt ratings on JPMorgan Chase & Co.  and the operating bank subsidiaries to “Aa2” and “Aaa”, respectively, from “Aa3” and “Aa2”, respectively.
The cost and availability of unsecured financing are influenced by credit ratings.
A reduction in these ratings could have an adverse effect on the Firm’s access to liquidity sources, increase the cost of funds, trigger additional collateral requirements and decrease the number of investors and counterparties willing to lend.
Key factors in maintaining high credit ratings include a stable and diverse earnings stream, leading market positions, strong capital ratios, strong credit quality and risk management controls, diverse funding sources and disciplined liquidity monitoring procedures.
If the Firm’s ratings were downgraded by one notch, the Firm estimates the incremental cost of funds and the potential loss of funding to be negligible.
Additionally, the Firm estimates the additional funding requirements for VIEs and other third-party commitments would not be material.
Currently, the Firm believes a downgrade is unlikely.
For additional information on the impact of a credit ratings downgrade on the funding requirements for VIEs, and on derivatives and collateral agreements, see Special-purpose entities on pages 66–67 and Ratings profile of derivative receivables mark-to-market (“MTM”) on page 81, of this Annual Report.
CREDIT RISK MANAGEMENT Credit risk is the risk of loss from obligor or counterparty default.
The Firm provides credit (for example, through loans, lending-related commitments and derivatives) to customers of all sizes, from large corporate clients to the individual consumer.
The Firm manages the risk/reward relationship of each credit extension and discourages the retention of assets that do not generate a positive return above the cost of the Firm’s risk-adjusted capital.
In addition, credit risk management includes the distribution of the Firm’s wholesale syndicated loan originations into the marketplace (primarily to IB clients), with retained exposure held by the Firm averaging less than 10%.
Wholesale loans generated by CB and AM are generally retained on the balance sheet.
With regard to the consumer credit market, the Firm focuses on creating a portfolio that is diversified from both a product and a geographic perspective.
Within the mortgage business, originated loans are either retained in the mortgage portfolio, or securitized and sold selectively to U. S.  government agencies and U. S.  government-sponsored enterprises.
Credit risk organization Credit risk management is overseen by the Chief Risk Officer and implemented within the lines of business.
The Firm’s credit risk management governance consists of the following functions: ?
establishing a comprehensive credit risk policy framework ?
calculating the allowance for credit losses and ensuring appropriate credit risk-based capital management ?
assigning and managing credit authorities in connection with the approval of all credit exposure ?
monitoring and managing credit risk across all portfolio segments ?
managing criticized exposures Risk identification The Firm is exposed to credit risk through lending and capital markets activities.
Credit risk management works in partnership with the business segments in identifying and aggregating exposures across all lines of business.
Risk measurement To measure credit risk, the Firm employs several methodologies for estimating the likelihood of obligor or counterparty default.
Losses generated by consumer loans are more predictable than wholesale losses, but are subject to cyclical and seasonal factors.
Although the frequency of loss is higher on consumer loans than on wholesale loans, the severity of loss is typically lower and more manageable on a portfolio basis.
As a result of these differences, methodologies for measuring credit risk vary depending on several factors, including type of asset (e. g. , consumer installment versus wholesale loan), risk measurement parameters (e. g. , delinquency status and credit bureau score versus wholesale risk rating) and risk management and collection processes (e. g. , retail collection center versus centrally managed workout groups).
Credit risk measurement is based upon the amount of exposure should the obligor or the counterparty default, the proba
Notes to consolidated financial statements JPMorgan Chase & Co. /2009 Annual Report 168 Nonrecurring fair value changes The following table presents the total change in value of financial instruments for which a fair value adjustment has been included in the Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007, related to financial instruments held at these dates.
Year ended December 31,
## Table 1 ##
In the above table, loans predominantly include: (1) write-downs of delinquent mortgage and home equity loans where impairment is based on the fair value of the underlying collateral; and (2) the change in fair value for leveraged lending loans carried on the Consolidated Balance Sheets at the lower of cost or fair value.
Accounts payable and other liabilities predominantly include the change in fair value for unfunded lending-related commitments within the leveraged lending portfolio.
Level 3 analysis Level 3 assets (including assets measured at fair value on a nonrecurring basis) were 6% of total Firm assets at both December 31, 2009 and 2008.
Level 3 assets were $130.4 billion at December 31, 2009, reflecting a decrease of $7.3 billion in 2009, due to the following: ?
A net decrease of $6.3 billion in gross derivative receivables, predominantly driven by the tightening of credit spreads.
Offsetting a portion of the decrease were net transfers into level 3 during the year, most notably a transfer into level 3 of $41.3 billion of structured credit derivative receivables, and a transfer out of level 3 of $17.7 billion of single-name CDS on ABS.
The fair value of the receivables transferred into level 3 during the year was $22.1 billion at December 31, 2009.
The fair value of structured credit derivative payables with a similar underlying risk profile to the previously noted receivables, that are also classified in level 3, was $12.5 billion at December 31, 2009.
These derivatives payables offset the receivables, as they are modeled and valued the same way with the same parameters and inputs as the assets.  ?
A net decrease of $3.5 billion in loans, predominantly driven by sales of leveraged loans and transfers of similar loans to level 2, due to increased price transparency for such assets.
Leveraged loans are typically classified as held-for-sale and measured at the lower of cost or fair value and, therefore, included in the nonrecurring fair value assets.  ?
A net decrease of $6.3 billion in trading assets – debt and equity instruments, primarily in loans and residential- and commercialMBS, principally driven by sales and markdowns, and by sales and unwinds of structured transactions with hedge funds.
The declines were partially offset by a transfer from level 2 to level 3 of certain structured notes reflecting lower liquidity and less pricing observability, and also increases in the fair value of other ABS.  ?
A net increase of $6.1 billion in MSRs, due to increases in the fair value of the asset, related primarily to market interest rate and other changes affecting the Firm's estimate of future prepayments, as well as sales in RFS of originated loans for which servicing rights were retained.
These increases were offset partially by servicing portfolio runoff.  ?
A net increase of $1.9 billion in accrued interest and accounts receivable related to increases in subordinated retained interests from the Firm’s credit card securitization activities.
Gains and Losses Gains and losses included in the tables for 2009 and 2008 included: 2009 ?
$11.4 billion of net losses on derivatives, primarily related to the tightening of credit spreads.  ?
Net losses on trading–debt and equity instruments of $671 million, consisting of $2.1 billion of losses, primarily related to residential and commercial loans and MBS, principally driven by markdowns and sales, partially offset by gains of $1.4 billion, reflecting increases in the fair value of other ABS.
(For a further discussion of the gains and losses on mortgage-related exposures, inclusive of risk management activities, see the “Mortgage-related exposures carried at fair value” discussion below. )
?
$5.8 billion of gains on MSRs.  ?
$1.4 billion of losses related to structured note liabilities, predominantly due to volatility in the equity markets.2008 ?
Losses on trading-debt and equity instruments of approximately $12.8 billion, principally from mortgage-related transactions and auction-rate securities.  ?
Losses of $6.9 billion on MSRs.  ?
Losses of approximately $3.9 billion on leveraged loans.  ?
Net gains of $4.6 billion related to derivatives, principally due to changes in credit spreads and rate curves.  ?
Gains of $4.5 billion related to structured notes, principally due to significant volatility in the fixed income, commodities and equity markets.  ?
Private equity losses of $638 million.
For further information on changes in the fair value of the MSRs, see Note 17 on pages 223–224 of this Annual Report.
Notes to consolidated financial statements JPMorgan Chase & Co. /2009 Annual Report 170 ent pricing provided by third-party vendors, broker quotes and relevant market indices, such as the ABX index, as applicable.
While none of those sources are solely indicative of fair value, they serve as directional indicators for the appropriateness of the Firm’s estimates.
Commercial mortgages Commercial mortgages are loans to companies backed by commercial real estate.
Commercial MBS are securities collateralized by a pool of commercial mortgages.
Typically, commercial mortgages have lock-out periods where the borrower is restricted from prepaying the loan for a specified timeframe, or periods where there are disincentives for the borrower to prepay the loan due to prepayment penalties.
These features reduce prepayment risk for commercial mortgages relative to that of residential mortgages.
Classification and Valuation While commercial mortgages and commercial MBS are classified within level 2 or level 3 of the valuation hierarchy, depending on the level of liquidity and activity in the markets, the majority of these mortgages, including both loans and lower-rated securities, are currently classified in level 3.
Level 2 assets include fixed-rate commercial MBS.
Commercial mortgage loans – Fair value of commercial mortgage loans is estimated by projecting the expected cash flows and discounting those cash flows at a rate reflective of current market liquidity.
To estimate the projected cash flows, consideration is given to both borrower-specific and other market factors, includ ing, but not limited to: the borrower’s debt-to-service coverage ratio; the type of commercial property (e. g. , retail, office, lodging, multi-family, etc.
); an estimate of the current loan-to-value ratio; and market-derived expectations for property price appreciation or depreciation in the respective geographic location.
Commercial mortgage-backed securities – When relevant market activity is not present or is limited, the value of commercial MBS is estimated considering the value of the collateral and the specific attributes of the securities held by the Firm.
The value of the collateral pool supporting the securities is analyzed using the same techniques and factors described above for the valuation of commercial mortgage loans, albeit in a more aggregated manner across the pool.
For example, average delinquencies, loan or geographic concentrations, and average debt-service coverage ratios, among other metrics, may be evaluated.
In addition, as each securitization vehicle distributes cash in a manner or order that is predetermined at the inception of the vehicle, the priority in which each particular MBS security is allocated cash flows, and the level of credit enhancement that is in place to support those cash flows, are key considerations in deriving the value of commercial MBS.
Finally, the risk premium that investors demand for securitized products in the current market is factored into the valuation.
To benchmark its valuations, the Firm utilizes independent pricing provided by third-party vendors, and broker quotes, as applicable.
While none of those sources are solely indicative of fair value, they serve as directional indicators for the appropriateness of the Firm’s estimates.
The following table presents mortgage-related activities within the available-for-sale securities portfolio
## Table 2 ##
(a) Represents direct mortgage-related obligations of government-sponsored enterprises.
(b) Excludes related net interest income.
Exposures in the table above include $216.8 billion and $140.1 billion of MBS classified as available-for-sale in the Firm’s Consolidated Balance Sheets at December 31, 2009 and 2008, respectively.
These investments are primarily used as part of the Firm’s centralized risk management of structural interest rate risk (the sensitivity of the Firm’s Consolidated Balance Sheets to changes in interest rates).
Changes in the Firm’s structural interest rate position, as well as changes in the overall interest rate environment, are continually monitored, resulting in periodic repositioning of securities classified as available-for-sale.
Given that this portfolio is primarily used to manage the Firm’s structural interest rate risk, nearly all of these securities are either backed by U. S.  government agencies or are rated “AAA.
” For additional information on investment securities in the available-for-sale portfolio, see Note 11 on pages 195–199 of this Annual Report.

<table><tr><td></td><td colspan="3">Short-term debt</td><td colspan="3">Senior long-term debt</td></tr><tr><td></td><td>Moody’s</td><td>S&P</td><td>Fitch</td><td>Moody’s</td><td>S&P</td><td>Fitch</td></tr><tr><td>JPMorgan Chase & Co.</td><td>P-1</td><td>A-1+</td><td>F1+</td><td>Aa2</td><td>AA-</td><td>AA-</td></tr><tr><td>JPMorgan Chase Bank, N.A.</td><td>P-1</td><td>A-1+</td><td>F1+</td><td>Aaa</td><td>AA</td><td>AA-</td></tr><tr><td>Chase Bank USA, N.A.</td><td>P-1</td><td>A-1+</td><td>F1+</td><td>Aaa</td><td>AA</td><td>AA-</td></tr></table>
<table><tr><td>(in millions)</td><td>2009</td><td>2008</td><td>2007</td></tr><tr><td>Loans retained</td><td>$-3,550</td><td>$-1,159</td><td>$-218</td></tr><tr><td>Loans held-for-sale</td><td>-389</td><td>-2,728</td><td>-502</td></tr><tr><td>Total loans</td><td>-3,939</td><td>-3,887</td><td>-720</td></tr><tr><td>Other assets</td><td>-104</td><td>-685</td><td>-161</td></tr><tr><td>Accounts payable andother liabilities</td><td>31</td><td>-285</td><td>2</td></tr><tr><td>Total nonrecurringfairvalue gains/(losses)</td><td>$-4,012</td><td>$-4,857</td><td>$-879</td></tr></table>
<table><tr><td>As of or for the year ended December 31,</td><td colspan="2">Exposures</td><td colspan="2">Net gains/(losses) reported in income during the year (b)</td><td colspan="2">Unrealized gains/(losses) included in other comprehensive income (pretax) during the year</td></tr><tr><td>(in millions)</td><td> 2009</td><td>2008</td><td>2009</td><td>2008</td><td>2009</td><td>2008</td></tr><tr><td> Mortgage-backed securities:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>U.S. government agencies</td><td>$167,898</td><td>$117,385</td><td>$1,232</td><td>$476</td><td>$849</td><td>$2,076</td></tr><tr><td>Residential:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Prime and Alt-A</td><td>4,523</td><td>6,895</td><td>-364</td><td>-32</td><td>856</td><td>-1,965</td></tr><tr><td>Subprime</td><td>17</td><td>194</td><td>-49</td><td>-89</td><td>19</td><td>-32</td></tr><tr><td>Non-U.S.</td><td>10,258</td><td>2,075</td><td>-1</td><td>2</td><td>412</td><td>-156</td></tr><tr><td>Commercial</td><td>4,590</td><td>3,939</td><td>-9</td><td>—</td><td>744</td><td>-684</td></tr><tr><td> Total mortgage-backed securities</td><td>$187,286</td><td>$130,488</td><td>$809</td><td>$357</td><td>$2,880</td><td>$-761</td></tr><tr><td>U.S. government agencies<sup>(a)</sup></td><td>29,562</td><td>9,657</td><td>5</td><td>11</td><td>-55</td><td>-54</td></tr></table>

Question: When does Commercial for Exposures reach the largest value?