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CORRESP
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CORRESP

Confidential Treatment

Requested by JPMorgan Chase & Co.

Page 1

May 4, 2006

Ms. Joyce Sweeney, Accounting Branch Chief

Ms. Sharon M. Blume, Staff Accountant

Division of Corporation Finance

United States Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20002

Mail Stop 4561

         Re:

    JPMorgan Chase & Co.

Form 10-K for the Fiscal Year Ended December 31, 2005

Filed March 9, 2006

File No. 1-5805

Dear Ms. Sweeney and Ms. Blume:

     JPMorgan Chase & Co. (the “Company”) hereby submits this letter to respond to comments by the
Staff of the Securities and Exchange Commission contained in your letter dated April 11, 2006
addressed to the undersigned.

     To assist in your review of our responses, we have set forth below in full the comments
contained in the letter, together with our responses to such comments.

     The Company hereby requests that the Securities and Exchange Commission afford confidential
treatment, pursuant to Rule 83, of the indicated portions of responses to Comments 1 and 3 of the
letter.

Form 10-K for Fiscal Year Ended December 31, 2005

Consolidated Financial Statements

Statements of Cash Flows, page 90

    1.

    We note that you report cash flows from sales and securitizations of loans as investing
activities. Please tell us how you determined that these cash flows should be reported as
investing, rather than operating activities. Describe the nature of the loans sold and
securitized and when you make that determination to classify loans
as held-for-sale, specifically at or subsequent to origination. Refer to paragraph 9 of
SFAS 102.

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Page 2

    Loans that are originated or purchased by the Firm and that management has the intent and
ability to hold for the foreseeable future are classified in the accrual loan portfolio and
are reported at the principal outstanding, net of the allowance for loan losses, unearned
income and any net deferred loan fees. Loans that are either originated or purchased by the
Firm and that management intends to sell or to securitize are classified as held-for-sale
and are carried at the lower of cost or fair value, with valuation changes recorded in
noninterest revenue.

    A loan may be transferred from the accrual portfolio to the held-for-sale portfolio due to
changes in the composition of the loan portfolio, changes in the current market environment,
for capital optimization purposes, and in response to the Firm’s risk management strategy.
Prior to transfer, management demonstrates and documents its intent to sell or to securitize
the loan. Documentation may include confirmation of management’s intent to sell a loan, a
business purpose for selling the loan, or other relevant information regarding the loan sale
such as the amount of the loan to be sold and loan pricing.

    JPMorgan Chase securitizes and sells various consumer loans (such as consumer real estate,
credit card and automobile loans) as well as certain wholesale loans (primarily real estate)
originated by the Investment Bank (IB). All IB activity is collectively referred to below as
Wholesale activities.

    Consumer

    •

    Residential Mortgages

At the time the Firm originates or purchases residential mortgages it does so with
either the intent to securitize/sell the loans or to hold the loans. Approximately 20%
of the Firm’s portfolio of residential mortgages is purchased from third-party financial
institutions. Residential mortgages that are originated or purchased with the intent to
sell are classified as held-for-sale at origination or purchase date. Residential
mortgages originated or purchased by the Firm that the Firm intends to hold are recorded
in the accrual loan portfolio. The decision to sell the loan or hold the loan at
origination or purchase date is based on the mortgage type. Generally, fixed-rate
residential mortgages are originated or purchased with the intent to securitize/sell and
are classified as held-for-sale. Adjustable rate mortgages (ARMs) are originated or
purchased with the intent to hold the loans in the accrual portfolio.

    There may be circumstances in which the Firm decides to transfer residential mortgage
loans from the accrual portfolio to the held-for-sale portfolio. The decision to
transfer certain mortgage loans from the accrual portfolio to the held-for-sale
portfolio is based on the Firm’s risk management (e.g., to reduce market risk or
product type concentrations) and capital optimization strategies. The Firm executed

Confidential Treatment

Requested by JPMorgan Chase & Co.

Page 3

    one such transfer during 2005 due to the concentration of certain mortgage products in the
accrual portfolio. [Redacted]

    Total residential mortgages classified as held-for-sale were $13.7 billion at December
31, 2005.

    •

    Credit Card

The Firm originates credit card receivables with the intent to hold them in the Firm’s
accrual loan portfolio. After the origination of the account, depending upon account
performance and status, a decision is made whether to transfer the account and related
receivable into the securitization trust. If the account and related receivable are
transferred into the securitization trust, then the Firm’s Seller’s Interest in the
securitization trust, which is classified in Loans on the consolidated balance sheet,
increases by the amount of the related receivable balances transferred. The subsequent
decision to securitize credit card receivables from the Seller’s Interest is dependent
upon the Firm’s risk management strategies and liquidity requirements at that specific
time.

    •

    Auto

The Firm originates auto loans with the intent to hold them in the Firm’s accrual loan
portfolio. A decision to sell or to securitize auto loans is made after the origination
of the loans based on the Firm’s capital optimization, liquidity management, and risk
management strategies, as well as upon market opportunities at the specific time. Once
the decision is made to sell or to securitize the loans, they are transferred to the
held-for-sale portfolio.

    Auto Finance completed two auto securitizations in 2005. The first involved a transfer
of $2.8 billion of loans to the held-for-sale portfolio, representing approximately 6%
of the accrual portfolio at the time of transfer. The second involved a transfer of
$1.6 billion of loans to the held-for-sale portfolio, representing 4% of the accrual
portfolio at the time of transfer. There were no auto loans designated as held-for-sale
at December 31, 2005.

    •

    Education

The Firm originates education loans with the intent to sell the loans.

    [Redacted]

    Wholesale

    •

    Commercial and residential mortgages/CLO warehouses

The IB originates commercial mortgage loans with the intent to securitize or sell such
loans. The IB also purchases residential mortgage loans from the Firm’s mortgage

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Page 4

    company warehouse (Chase Home Finance’s held-for-sale portfolio) and from third parties
with the intent to securitize or sell them. Approximately [Redacted] of the residential
mortgages that are purchased by the IB are purchased from Chase Home Finance; the
balance is purchased from third-party financial institutions. Both commercial and
residential mortgages are classified as held-for-sale at origination/purchase date.
[Redacted]

    In addition to mortgage securitization activities, the IB also provides funding to loan
warehouses established to facilitate the creation of Collateralized Loan Obligations
(CLOs) by third parties. Pursuant to FASB Interpretation No. 46R, Consolidation of
Variable Interest Entities, the Firm consolidates on the balance sheet the underlying
loans purchased and held by the CLO warehouse; these loans are classified as
held-for-sale at their purchase date. [Redacted]

    •

    Excess positions in a loan syndication

Borrowers often request to borrow an amount greater than any one lender is willing to
lend. Therefore, it is common for a group of lenders to participate in a lending to a
borrower. The shared lending arrangement may be accomplished by syndication. When
JPMorgan Chase acts as a lead syndicator, it establishes a target hold position (i.e.,
the amount that JPMorgan Chase intends to hold in its accrual portfolio). Any amount of
the loan that JPMorgan Chase retains above its target hold is referred to as an “excess
position”. Excess positions are classified as held-for-sale at the syndication funding
date, and the Firm actively pursues assignment of these loans to another lender.

    [Redacted]

    •

    Commercial whole loan sales

As part of the Firm’s overall credit risk management strategy, the IB may sell
originated loans from its credit portfolio. Originated loans are transferred to the
held-for-sale category only when there is a formal plan to sell the loans in accordance
with the March 2001 Interagency Statement on Certain Loans Held for Sale. See page 41
of the Firm’s Annual Report on Form 10-K for the year ended December 31, 2005 (the
“Annual Report”) for more information regarding the credit risk management strategy of
the wholesale credit portfolio.

    [Redacted]

    •

    Purchased non-performing loans

As part of the IB’s proprietary activities, the Firm purchases wholesale nonperforming
loans with the intent to securitize or sell the loans after the loans have
been “worked-out” (e.g., restructured, emerged from bankruptcy, etc.). These loans are
classified as held-for-sale at the time of purchase.

Confidential Treatment

Requested by JPMorgan Chase & Co.

Page 5

    Total nonperforming loans classified as held-for-sale were $0.3 billion at December 31,
2005.

    As noted by the Staff, the Firm has historically viewed its loan sales and loan
securitization activities as investing in its Statement of Cash Flows and classified its
loan activities, whether classified as held-for-sale at inception or subsequent to
origination or purchase of the loans, consistently. The Firm notes that as a banking
institution it does not have a classified balance sheet and records both accrual and
held-for-sale loans as Loans on the Consolidated balance sheet. Accordingly, the Firm has
used a consistent classification on its Statement of Cash Flows in order to present to the
reader management’s view of investing activities. The Firm believes its presentation
provides the reader with consistent and relevant information about cash receipts and cash
payments related to the Firm’s overall lending and investing activities.

    2.

    Please tell us the composition of the line item “All other financing activities, net”
for 2005.

    For 2005, the line item “All other financing activities, net” is primarily composed of net
cash flows from derivative transactions for which there was an other-than-insignificant
financing element present at the inception of the transactions. These items are reported as
financing cash flows in accordance with paragraph 37 of Statement 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities.

Note 26- Accounting for derivative instruments and hedging activities, page 123

    3.

    For each type of hedging relationship entered into during the periods presented, please
tell us how you determined that they met the criteria for hedge accounting pursuant to
paragraphs 20, 21, 28 and 29 of SFAS 133. Specifically address the following for each type
of hedging relationship:

    •

    the nature and terms of the hedged item or transaction;

    •

    the nature and terms of the derivative instruments;

    •

    the specific documented risk being hedged;

    •

    the type of SFAS 133 hedge (fair value, cash flow, etc.); and

    •

    the quantitative measures you use to assess effectiveness of each hedge both at
inception and on an ongoing basis.

Confidential Treatment

Requested by JPMorgan Chase & Co.

Page 6

    The Corporate, Retail Financial Services and Investment Banking segments are the only
business segments within the Firm currently approved to apply hedge accounting under SFAS
133. The Firm’s hedge relationships are primarily limited to hedges of benchmark interest
rate risk and foreign currency risk. Libor (applicable to each currency — US Dollar Libor,
Euribor, etc) is the Firm’s consistent benchmark interest rate risk designation.

    The following section describes in further detail information about the application of hedge
accounting and the different hedge strategies currently employed by the Firm as of December
31, 2005 within those three business segments. Strategies with de minimus amounts of open
hedges as of that date are not discussed below.

    Corporate

The Chief Investment Office (CIO) within the Corporate segment is primarily responsible for
managing the structural interest rate and foreign currency risk of the Firm. The types of
hedge relationships within the Chief Investment Office are as follows (notional amounts are
as of December 31, 2005):

    [Redacted]

    4.

    Please tell us whether you use the short-cut method or matched terms for assuming no
ineffectiveness for any of your hedging relationships that qualify for hedge accounting
treatment under SFAS 133. If so, please tell us how you determine that the hedging
relationship meets each of the conditions in paragraph 68 or 65 of SFAS 133.

    As noted in the prior response, the Firm primarily uses the shortcut method for fair value
hedges of fixed-rate bullet-maturity long-term debt and certain fixed-rate bullet-maturity
resale agreements. The Firm does not use the shortcut method for cash flow hedges.

    In its use of the shortcut method for fair value hedges, the Firm ensures the following:

    •

    The notional amounts of interest rate swaps used as hedges match exactly the
principal amounts of the interest bearing assets or liabilities being hedged.

    •

    The fair value of the interest rate swaps used as hedges are equal to zero at the
inception of the hedge. The swaps do not include up-front cash payments or fees. If a
swap includes a mirror image call or put, the premium is paid or received in the
same manner in the swap as in the hedged item, either at inception or paid over the
life.

Confidential Treatment

Requested by JPMorgan Chase & Co.

Page 7

    •

    The fixed rates are the same throughout the terms of the swaps, and the floating
rates are based on the same index and include the same constant credit spreads
throughout the terms of the swaps. The floating rate index used is Libor (applicable
to each currency).

    •

    The hedged items are generally not prepayable, as defined in paragraph 68.d. and DIG
Issue E-6. However, in certain circumstances, the hedged items may include a simple
embedded call or put. If so, this embedded option is mirrored in the interest rate
swap such that the terms of the two call options match— including maturity, strike
price, related notional amount, timing and frequency of payments, and dates on which
the instruments may be called.

    •

    The index on which the variable leg of the swap is based is the Libor rate
applicable to the currency of the hedge relationship, and therefore matches the
benchmark interest rate designated as the interest rate risk being hedged.

    •

    The Firm limits is usage of the shortcut method to the simplest of hedge
relationships, primarily fair value hedges of bullet maturity fixed-rate debt, and
certain fixed-rate bullet maturity resale agreements. These instruments may also
include a simple embedded call or put. The Firm does not apply the shortcut method to
hedged items or hedging instruments with terms that are not typical of those
instruments.

    •

    The expiration dates of the swaps exactly match the maturity dates of the respective
interest-bearing assets or liab