99% Confidence Level VaR IB trading VaR by risk type and credit portfolio VaR
## Table 0 ##
(a) The results for the year ended December 31, 2008, include five months of heritage JPMorgan Chase only results and seven months of results for the combined JPMorgan Chase and Bear Stearns; 2007 reflects heritage JPMorgan Chase results only.
(b) Average and period-end VaRs were less than the sum of the VaRs of its market risk components, which is due to risk offsets resulting from portfolio diversification.
The diversification effect reflects the fact that the risks were not perfectly correlated.
The risk of a portfolio of positions is therefore usually less than the sum of the risks of the positions themselves.
(c) Designated as not meaningful (“NM”) because the minimum and maximum may occur on different days for different risk components, and hence it is not meaningful to compute a portfolio diversification effect.
Trading VaR includes substantially all trading activities in IB.
Beginning in the fourth quarter of 2008, the credit spread sensitivities of certain mortgage products were included in trading VaR.
This change had an insignificant net impact on the average fourth quarter 2008 VaR.
However, trading VaR does not include: held-for-sale funded loan and unfunded commitments positions (however, it does include hedges of those positions); the debit valuation adjustments (“DVA”) taken on derivative and structured liabilities to reflect the credit quality of the Firm; the MSR portfolio; and securities and instruments held by corporate functions, such as Corporate/Private Equity.
See the DVA Sensitivity table on page 115 of this Annual Report for further details.
For a discussion of MSRs and the corporate functions, see Note 4 on pages 141–155, Note 18 on pages 198–201 and Corporate/ Private Equity on pages 73–75 of this Annual Report.2008 VaR results IB’s average total trading and credit portfolio VaR was $202 million for 2008, compared with $106 million for 2007, and includes the positions from the Bear Stearns merger since May 31, 2008.
The increase in average and maximum VaR during 2008 compared with the prior year was primarily due to increased volatility across virtually all asset classes.
In addition, increased hedges of positions not specifically captured in VaR – for example, macro hedge strategies that have been deployed to mitigate the consequences of a systemic risk event and hedges of loans held-for-sale – significantly increased the VaR compared with the prior period.
For 2008, compared with the prior year, average trading VaR diversification increased to $108 million from $77 million, reflecting the impact of the Bear Stearns merger.
In general, over the course of the year, VaR exposures can vary significantly as positions change, market volatility fluctuates and diversification benefits change.
VaR backtesting To evaluate the soundness of its VaR model, the Firm conducts daily back-testing of VaR against daily IB market risk-related revenue, which is defined as the change in value of principal transactions revenue (less Private Equity gains/losses) plus any trading-related net interest income, brokerage commissions, underwriting fees or other revenue.
The daily IB market risk-related revenue excludes gains and losses on held-for-sale funded loans and unfunded commitments and from DVA.
The following histogram illustrates the daily market riskrelated gains and losses for IB trading businesses for the year ended 2008.
The chart shows that IB posted market risk-related gains on 165 of the 262 days in this period, with 54 days exceeding $120 million.
The inset graph looks at those days on which IB experienced losses and depicts the amount by which 99% confidence level VaR exceeded the actual loss on each of those days.
During the year ended December 31, 2008, losses were sustained on 97 days; losses exceeded the VaR measure on three of those days compared with eight days for the year ended 2007.
The Firm would expect to incur losses greater than those predicted by the 99% confidence level VaR estimates once in every 100 trading days, or about two to three times a year.
measure.
In the Firm’s view, including these items in VaR produces a more complete perspective of the Firm’s risk profile for items with market risk that can impact the income statement.
The Consumer Lending VaR includes the Firm’s mortgage pipeline and warehouse loans, MSRs and all related hedges.
The revised VaR measure continues to exclude the DVA taken on derivative and structured liabilities to reflect the credit quality of the Firm.
It also excludes certain nontrading activity such as Private Equity, principal investing (e. g. , mezzanine financing, tax-oriented investments, etc. )
and Corporate balance sheet and capital management positions, as well as longer-term corporate investments.
Corporate positions are managed through the Firm’s earnings-at-risk and other cash flow monitoring processes rather than by using a VaR measure.
Nontrading principal investing activities and Private Equity positions are managed using stress and scenario analyses.
Changing to the 95% confidence interval caused the average VaR to drop by $85 million in the third quarter when the new measure was implemented.
Under the 95% confidence interval, the Firm would expect to incur daily losses greater than those predicted by VaR estimates about twelve times a year.
The following table provides information about the sensitivity of DVA to a one basis point increase in JPMorgan Chase’s credit spreads.
The sensitivity of DVA at December 31, 2008, represents the Firm (including Bear Stearns), while the sensitivity of DVA for December 31, 2007, represents heritage JPMorgan Chase only.
Debit Valuation Adjustment Sensitivity
## Table 1 ##
Loss advisories and drawdowns Loss advisories and drawdowns are tools used to highlight to senior management trading losses above certain levels and initiate discussion of remedies.
Economic value stress testing While VaR reflects the risk of loss due to adverse changes in normal markets, stress testing captures the Firm’s exposure to unlikely but plausible events in abnormal markets.
The Firm conducts economic value stress tests for both its trading and nontrading activities at least every two weeks using multiple scenarios that assume credit spreads widen significantly, equity prices decline and interest rates rise in the major currencies.
Additional scenarios focus on the risks predominant in individual business segments and include scenarios that focus on the potential for adverse moves in complex portfolios.
Periodically, scenarios are reviewed and updated to reflect changes in the Firm’s risk profile and economic events.
Along with VaR, stress testing is important in measuring and controlling risk.
Stress testing enhances the understanding of the Firm’s risk profile and loss potential, and stress losses are monitored against limits.
Stress testing is also utilized in one-off approvals and cross-business risk measurement, as well as an input to economic capital allocation.
Stress-test results, trends and explanations are provided at least every two weeks to the Firm’s senior management and to the lines of business to help them better measure and manage risks and understand event risk-sensitive positions.
Earnings-at-risk stress testing The VaR and stress-test measures described above illustrate the total economic sensitivity of the Firm’s balance sheet to changes in market variables.
The effect of interest rate exposure on reported net income is also important.
Interest rate risk exposure in the Firm’s core nontrading business activities (i. e. , asset/liability management positions) results from on- and off-balance sheet positions and can occur due to a variety of factors, including: ?
Differences in the timing among the maturity or repricing of assets, liabilities and off-balance sheet instruments.
For example, if liabilities reprice quicker than assets and funding interest rates are declining, earnings will increase initially.  ?
Differences in the amounts of assets, liabilities and off-balance sheet instruments that are repricing at the same time.
For example, if more deposit liabilities are repricing than assets when general interest rates are declining, earnings will increase initially.  ?
Differences in the amounts by which short-term and long-term market interest rates change.
For example, changes in the slope of the yield curve because the Firm has the ability to lend at long-term fixed rates and borrow at variable or short-term fixed rates.
Based upon these scenarios, the Firm’s earnings would be affected negatively by a sudden and unanticipated increase in short-term rates paid on its liabilities (e. g. , deposits) without a corresponding increase in long-term rates received on its assets (e. g. , loans).
Conversely, higher long-term rates received on assets generally are beneficial to earnings, particularly when the increase is not accompanied by rising short-term rates paid on liabilities.  ?
The impact of changes in the maturity of various assets, liabilities or off-balance sheet instruments as interest rates change.
For example, if more borrowers than forecasted pay down higher rate loan balances when general interest rates are declining, earnings may decrease initially.
The Firm manages interest rate exposure related to its assets and liabilities on a consolidated, corporate-wide basis.
Business units transfer their interest rate risk to Treasury through a transfer-pricing system, which takes into account the elements of interest rate exposure that can be risk-managed in financial markets.
These elements include asset and liability balances and contractual rates of interest, contractual principal payment schedules, expected prepayment experience, interest rate reset dates and maturities, rate indices used for re-pricing, and any interest rate ceilings or floors for adjustable rate products.
All transfer-pricing assumptions are dynamically reviewed.
The Firm conducts simulations of changes in net interest income from its nontrading activities under a variety of interest rate scenarios.
Earnings-at-risk tests measure the potential change in the Firm’s net interest income, and the corresponding impact to the Firm’s pre-
EXECUTIVE OVERVIEW This overview of management’s discussion and analysis highlights selected information and may not contain all of the information that is important to readers of this Annual Report.
For a complete description of events, trends and uncertainties, as well as the capital, liquidity, credit and market risks, and the critical accounting estimates affecting the Firm and its various lines of business, this Annual Report should be read in its entirety.
Financial performance of JPMorgan Chase
## Table 2 ##
(a) Includes an accounting conformity provision for credit losses of $1.5 billion related to the acquisition of Washington Mutual Bank’s banking operations in 2008.
(b) JPMorgan Chase acquired the banking operations of Washington Mutual Bank from the Federal Deposit Insurance Corporation (“FDIC”) for $1.9 billion.
The fair value of the net assets acquired from the FDIC exceeded the purchase price which resulted in negative goodwill.
In accordance with SFAS 141, nonfinancial assets that are not held-for-sale were written down against that negative goodwill.
The negative goodwill that remained after writing down nonfinancial assets was recognized as an extraordinary gain in 2008.
The allocation of the purchase price to the net assets acquired (based on their respective fair values at September 25, 2008) and the resulting negative goodwill may be modified through September 25, 2009, as more information is obtained about the fair value of assets acquired and liabilities assumed.
(c) On September 25, 2008, JPMorgan Chase acquired the banking operations of Washington Mutual Bank.
On May 30, 2008, the merger with The Bear Stearns Companies, Inc.  was consummated.
Each of these transactions was accounted for as a purchase and their respective results of operations are included in the Firm’s results from each respective transaction date.
For additional information on these transactions, see Note 2 on pages 135–140 of this Annual Report.
Business overview JPMorgan Chase reported 2008 net income of $5.6 billion, or $1.37 per share, and total net revenue of $67.3 billion, compared with record net income of $15.4 billion, or $4.38 per share, and record total net revenue of $71.4 billion, for 2007.
Return on common equity was 4% in 2008, compared with 13% in 2007.
Results in 2008 include the acquisition of The Bear Stearns Companies Inc.  (“Bear Stearns”) on May 30, 2008, and the acquisition of the banking operations of Washington Mutual Bank (“Washington Mutual”) on September 25, 2008.
The decline in net income for the year was the result of a significantly higher provision for credit losses, reflecting the addition of $13.7 billion to the Firm’s allowance for credit losses in 2008; a decline in total net revenue driven by over $10 billion of markdowns on mortgage-related positions and leveraged lending exposures in the Investment Bank; and an increase in total noninterest expense due to the impact of the Washington Mutual transaction and the Bear Stearns merger.
The business environment for financial services firms was extremely challenging in 2008.
The global economy slowed, with many countries, including the U. S. , slipping into recession.
Financial conditions worsened throughout the year amid a number of unprecedented developments that undermined the economic outlook and eroded confidence in global financial markets.
JPMorgan Chase acquired Bear Stearns through a merger consummated in May and acquired the banking operations of Washington Mutual from the Federal Deposit Insurance Corporation (“FDIC”) in September.
The U. S.  federal government placed the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Association (“Fannie Mae”) under its control.
Lehman Brothers Holdings Inc.  declared bankruptcy.
The Bank of America Corporation acquired Merrill Lynch & Co. , Inc.  and Wells Fargo & Company acquired Wachovia Corporation.
The government provided a loan to American International Group, Inc.  (“AIG”) in exchange for an equity interest in AIG to prevent the insurer’s failure.
Morgan Stanley, The Goldman Sachs Group, Inc. , GMAC, American Express, Discover Financial Services and CIT Group received approval from the Board of Governors of the Federal Reserve System (the “Federal Reserve”) to become federal bank holding companies.
In other industries, the U. S.  government provided temporary loans to General Motors Corporation and Chrysler LLC.
These events accompanied severe strains in term funding markets, reflecting heightened concerns about counterparty risk.
As a result, LIBOR rates rose significantly in the fall, despite a round of coordinated rate cuts by a number of central banks.
By year-end, LIBOR rates eased in response to proposals to insure deposits and selected debt of financial institutions.
The turmoil in financial markets during 2008 led to tighter credit conditions and diminished liquidity, causing consumers and businesses around the world to become more cautious and curtail spending and investment activity.
As a result, the U. S.  economy contracted sharply, 2.8 million jobs were lost in 2008, and the U. S.  unemployment rate rose significantly, to 7.2% by year-end.
The continued economic and financial disruption led the Federal Reserve to reduce its target overnight interest rates to near zero in the fourth quarter of 2008, capping off a year of near-continuous rate reductions.
In addition, the U. S.  Department of the Treasury (the “U.
S.  Treasury”), the Federal Reserve and the FDIC, working in cooperation with foreign governments and other central banks, including the Bank of England, the European Central Bank and the Swiss National Bank, began, in the fourth quarter of 2008, to take a variety of extraordinary measures designed to restore confidence in the financial markets and strengthen financial institutions, including capital injections, guarantees of bank liabilities and the acquisition of illiquid assets from banks.
In particular, on October 3, 2008, the Emergency Economic Stabilization Act of 2008 (the “EESA”) was signed into law.
Pursuant to the EESA, the U. S.  Treasury has the authority to take a range of

<table><tr><td>As of or for the year ended</td><td colspan="5"> 2008</td><td></td><td colspan="5">2007</td><td></td><td colspan="3">At December 31,</td><td></td></tr><tr><td>December 31,<sup>(a)</sup>(in millions)</td><td>Average</td><td></td><td>Minimum</td><td></td><td>Maximum</td><td></td><td>Average</td><td></td><td>Minimum</td><td></td><td>Maximum</td><td></td><td> 2008</td><td></td><td>2007</td><td></td></tr><tr><td> By risk type:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fixed income</td><td>$181</td><td></td><td>$99</td><td></td><td>$409</td><td></td><td>$80</td><td></td><td>$25</td><td></td><td>$135</td><td></td><td>$253</td><td></td><td>$106</td><td></td></tr><tr><td>Foreign exchange</td><td>34</td><td></td><td>13</td><td></td><td>90</td><td></td><td>23</td><td></td><td>9</td><td></td><td>44</td><td></td><td>70</td><td></td><td>22</td><td></td></tr><tr><td>Equities</td><td>57</td><td></td><td>19</td><td></td><td>187</td><td></td><td>48</td><td></td><td>22</td><td></td><td>133</td><td></td><td>69</td><td></td><td>27</td><td></td></tr><tr><td>Commodities and other</td><td>32</td><td></td><td>24</td><td></td><td>53</td><td></td><td>33</td><td></td><td>21</td><td></td><td>66</td><td></td><td>26</td><td></td><td>27</td><td></td></tr><tr><td>Diversification</td><td>(108</td><td> )<sup>(b)</sup></td><td>NM</td><td><sup>(c)</sup></td><td>NM</td><td><sup>(c)</sup></td><td>(77</td><td>)<sup>(b)</sup></td><td>NM</td><td><sup>(c)</sup></td><td>NM</td><td><sup>(c)</sup></td><td>(152</td><td> )<sup>(b)</sup></td><td>(82</td><td>)<sup>(b)</sup></td></tr><tr><td> Trading VaR</td><td>$196</td><td></td><td>$96</td><td></td><td>$420</td><td></td><td>$107</td><td></td><td>$50</td><td></td><td>$188</td><td></td><td>$266</td><td></td><td>$100</td><td></td></tr><tr><td>Credit portfolio VaR</td><td>69</td><td></td><td>20</td><td></td><td>218</td><td></td><td>17</td><td></td><td>8</td><td></td><td>31</td><td></td><td>171</td><td></td><td>22</td><td></td></tr><tr><td>Diversification</td><td>(63</td><td> )<sup>(b)</sup></td><td>NM</td><td><sup>(c)</sup></td><td>NM</td><td><sup>(b)</sup></td><td>(18</td><td>)<sup>(b)</sup></td><td>NM</td><td><sup>(c)</sup></td><td>NM</td><td><sup>(c)</sup></td><td>(120</td><td> )<sup>(b)</sup></td><td>(19</td><td>)<sup>(b)</sup></td></tr><tr><td> Total trading and creditportfolio VaR</td><td>$202</td><td></td><td>$96</td><td></td><td>$449</td><td></td><td>$106</td><td></td><td>$50</td><td></td><td>$178</td><td></td><td>$317</td><td></td><td>$103</td><td></td></tr></table>
<table><tr><td>(in millions)</td><td>1 Basis Point Increase in JPMorgan Chase Credit Spread</td></tr><tr><td>December 31, 2008</td><td>$32</td></tr><tr><td>December 31, 2007</td><td>$38</td></tr></table>
<table><tr><td>(in millions, except per share and ratio data)</td><td>2008(c)</td><td>2007</td><td>Change</td></tr><tr><td> Selected income statement data</td><td></td><td></td><td></td></tr><tr><td>Total net revenue</td><td>$67,252</td><td>$71,372</td><td>-6%</td></tr><tr><td>Provision for credit losses<sup>(a)</sup></td><td>20,979</td><td>6,864</td><td>206</td></tr><tr><td>Total noninterest expense</td><td>43,500</td><td>41,703</td><td>4</td></tr><tr><td>Income before extraordinary gain</td><td>3,699</td><td>15,365</td><td>-76</td></tr><tr><td>Extraordinary gain<sup>(b)</sup></td><td>1,906</td><td>—</td><td>NM</td></tr><tr><td> Net income</td><td>5,605</td><td>15,365</td><td>-64</td></tr><tr><td> Diluted earnings per share</td><td></td><td></td><td></td></tr><tr><td>Income before extraordinary gain</td><td>$0.84</td><td>$4.38</td><td>-81</td></tr><tr><td>Net income</td><td>1.37</td><td>4.38</td><td>-69</td></tr><tr><td> Return on common equity</td><td></td><td></td><td></td></tr><tr><td>Income before extraordinary gain</td><td>2%</td><td>13%</td><td></td></tr><tr><td>Net income</td><td>4%</td><td>13%</td><td></td></tr></table>

Question: what was the total impact on dva of a 1 basis point increase in jpmorgan chase credit spread for 2008 and 2007?