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RESPONSE LETTER

Confidential Treatment

Requested by JPMorgan Chase & Co.

Page 1

January 3, 2008

Mr. Donald Walker, Senior Assistant Chief Accountant

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, 2006

Form 10-Q for the Fiscal Quarter Ended March 31, 2007

File No. 1-5805

Dear Mr. Walker and Ms. Blume:

     JPMorgan Chase & Co. (the “Firm”) hereby submits this letter to respond to comments by the
Staff of the Securities and Exchange Commission contained in your letter dated October 19, 2007
addressed to Michael J. Cavanagh.

     The Company hereby requests that the Securities and Exchange Commission afford confidential
treatment, pursuant to the provisions of 17 C.F.R. §200.83, of the indicated portions of the letter.

Form 10-K for Fiscal Year Ended December 31, 2006

Notes to Consolidated Financial Statements

Note 13 — Allowance for Loan Losses, page 113

Response to Comment No. 1

For the businesses that are aligned to the capital markets (the Investment Bank, Treasury
& Securities Services, Asset & Wealth Management and Commercial Bank mid-Corporate), the
EDFs used by the Firm are based on external statistical default and migration data from
S&P and Moody’s as well as on default factors extracted from 3-month average Credit
Default Swap (CDS) spreads. The combination of these two sources of default information
is appropriate in the Firm’s view because, as further described below, each on its own has
limitations — historical statistical default data is often a lagging indicator of loss
and CDS spreads may overestimate loss in volatile times, due to liquidity concerns of market participants, for example. Historical default
data uses a long time frame —over 20 years. As a result, current changes in credit
conditions often do not significantly affect historical default data in a timely manner

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because the impact of recent events is lessened when combined with data over a long
time frame. To compensate for this, we use the 3-month average CDS default data as a way
to reflect current market conditions in the EDFs. We believe use of CDS default data is
appropriate based on the type of obligors in the Firm’s capital markets portfolios, which
are generally large and mid-corporate issuers. [redacted]

As stated in our letter dated September 19, 2007, the combination of historical experience
and CDS spreads is used to develop EDFs by risk rating and maturity. These EDFs are then
applied on an individual borrower basis given the specific attributes of that borrower,
i.e., a specific EDF is applied to a specific borrower based on the borrower’s risk rating
and the maturity of the underlying facility.

Loss given default (“LGD”) estimates are based on a study of actual loss experience over a
twenty-year period. The Firm utilizes a longer timeframe because it covers two or three
credit cycles and provides the Firm with a robust population of defaults (approximately
three thousand defaults) to analyze for recovery data. We believe it is appropriate to
use this longer timeframe as we believe that it important to measure the severity of
losses over more than one credit cycle, as no two credit cycles are the same; using a
longer timeframe provides, in our view, a better estimate of loss upon default at any
point in the credit cycle.

We confirm that the statistical calculation presented is the actual calculation we use as
part of our determination of the formula-based component of the allowance for loan losses.
For your information, we refer you to Note 13 at page 113 of our 2006 Form 10-K for further
information on the calculation of this formula-based component of the allowance.

In general, there are two criteria that must be met in order to establish an allowance for
credit losses on performing loans in accordance with SFAS 5:

    •

    The events giving rise to a probable loss have occurred as of the balance sheet
date, even though the confirming event (e.g., the borrower’s default) has not
occurred or been identified as of the balance sheet date (that is, it is probable
that the future event or events to confirm the loss that exists as of the balance
sheet date will occur); and

    •

    The amount of the loss can be reasonably estimated.

[redacted]

Note 28 — Accounting for Derivative and Hedging Activities, page 131

Response to Comment No. 2

The first derivative to be executed is the internal derivative between the hedging unit and
the Firm’s internal trading desk. The internal derivative is transacted at the market rate
existing at the time of its execution, and no cash is exchanged between the internal units.
The internal trading desk must then execute with an external counterparty a derivative
with terms, including notional, currency, index, maturity date, fixed rate, reset dates,
and

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payments dates, that match those of the internal derivative. The external derivative
is executed as soon as possible, and in all cases before the end of the same business day.
The external derivative is transacted at the market rate at the time of its execution,
which may differ slightly from the market rate at the time of the internal derivative
transaction. No cash is exchanged between the trading desk and the external counterparty.
No cash is exchanged between the internal units to compensate for market rate movements
between the time of the execution of the internal swap and the time of execution of the
external swap.

[redacted] The internal trading desk does not charge the hedging unit a markup, and gives
a price to the hedging unit that is the same as the price it would offer to a similar but
unaffiliated third party. [redacted]

To further explain how the Firm’s consolidated financial statements are prepared, the
Firm’s two-step process for recording these transactions (as discussed in our letter dated
September 19, 2007) is further described below.

[redacted]

As noted above, because the trading desk prices the internal derivative at levels
consistent with those at which it transacts with external counterparties (i.e., there is no
additional internal markup), the differences in rates are not due to incremental inception
profit. Rather, the differences in rates between the internal and external derivatives
result from market movements on the trade date that occur between the execution times of
the two derivatives. [redacted]

Response to Comment No. 3

Verification is performed at the level at which the hedging activities are undertaken (the
“hedging unit” level); these “hedging unit” levels are below the operating segment level.
The Firm currently conducts hedge accounting in only two hedging units: all interest rate
and foreign currency hedging is conducted by the Chief Investment Office which is within
the Corporate segment; and the Commodities unit within the Investment Bank segment hedges
the bullion risk described in the Firm’s response to comment 5 below.

Response to Comment No. 4

As discussed in our response in Comment 2- above, if the hedging unit executes an internal
derivative with the internal trading desk, the internal trading desk must execute with an
external counterparty a derivative with terms, including notional, currency, index,
maturity date, fixed rate, reset dates, and payments dates, that match those of the
internal derivative. Also as noted above, the floating-rate leg of the internal derivative
may differ slightly from the floating-rate leg of the external derivative due to intraday market
movements between the execution times of the two derivatives. [redacted]

During 2006, the Firm chose to discontinue its use of the shortcut method to assess hedge
effectiveness. During the period when the shortcut method was being applied, the Firm

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did use the internal trading desk to execute certain external derivatives for shortcut
hedge relationships. We confirm that all of the criteria of paragraph 68 of SFAS 133 were
met completely with respect to the third party derivatives that were used for the short cut
hedge relationships.

[redacted]

Response to Comment No. 5

As requested, a sample contract is attached as Appendix A. A counterparty deposits a
defined amount of bullion with the Firm for a specified period (these periods generally
range from [redacted]). At maturity, the Firm returns to the counterparty the initial
deposit of gold, plus a specified rate of interest that may be paid in cash or in gold
depending on the specific contract terms. No cash is exchanged at inception of the
contract. The Firm has the right to sell and transfer the gold without any restrictions or
permission from the depositors. The contract does not require the Firm to return specific
bars of gold; rather, the Firm may source from other inventory or from the market the
defined quantity of gold of the specified quality to be delivered in satisfaction of the
obligation at the end of the specified period.

[redacted]

The Firm’s fact pattern is similar to that described in paragraph B7 of EITF 01-8
“Determining whether an Arrangement contains a Lease”, in which “a supplier leases a
quantity of precious metals to a manufacturer” where the [redacted] are the suppliers and
the Firm is the manufacturer. As described in the EITF issue, “the manufacturer uses the
precious metals in its manufacturing process and salvages the same metals from used
product. At the end of the arrangement, the manufacturer returns the same quantity of
precious metals (either from salvage or by purchasing from others) to the supplier.” As
described in footnote 11 of EITF 01-8, the Firm accounts for its liability to return the
gold as a loan host contract with an embedded gold forward contract. As the Firm has free
and unrestricted right to use and dispose of the gold during the contract term, the Firm
records the gold as physical commodity inventory measured at the lower of cost or market as
long as the deposit is held.

[redacted]

The Firm commenced hedge accounting in the fourth quarter of 2006. The results of hedge
accounting for the periods presented are shown below. [redacted]

Response to Comment No. 6

In the absence of actual historical fair value data for the hedged item and the hedging
instrument at inception of a hedge relationship, estimates of changes in the fair value of
the hedged item and hedging instrument are used. These fair value changes are estimated by
first calculating the effective duration and effective convexity of the hedged item and
hedging derivative. Commonly used by financial institutions, these measures quantify

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the sensitivity of financial instruments, such as long-term debt, to interest rate
changes. Effective duration is the average percentage change in an instrument’s price
given a one percent shift in interest rates and is a linear measure of how the price of an
instrument changes in response to interest rate changes. However, as interest rates
change, prices of instruments do not change linearly, but rather curve (or is a ‘convex’
function of interest rates). Effective convexity is a measure of the curvature of how the
price of an instrument changes as the interest rates change. Use of both the effective
duration and effective convexity of an instrument can provide estimates for an instrument’s
change in fair value given a change in interest rates.

[redacted]

As noted above, effective duration and effective convexity are measures of the sensitivity
of financial instruments to changes in interest rates. Once the instruments’ sensitivity
to interest rates is calculated, the historic monthly benchmark interest rate changes can
be applied to the sensitivities in order to model the hedged item’s and hedging
derivative’s changes in fair value due to such changes in the benchmark interest rate in
the historic rate environment — even though the instruments did not exist during the
historic time period. These “estimate” fair value changes for the hedged item and hedging
derivative are then regressed for the initial assessment of prospective hedge
effectiveness. As actual fair value changes are realized during the hedge relationship,
these actual fair value changes replace the “estimate” fair value changes in ongoing
retrospective and prospective assessments.

Under the Firm’s policy, hedging units must consider either the t-statistic, F-statistic or
p value in addition to the correlation and slope results in initial prospective and
retrospective assessments of hedge effectiveness. [redacted]

Response to Comment No. 7

As noted above, under the Firm’s policy, hedging units must consider either the
t-statistic, F-statistic or p value in addition to the correlation and slope results in
both initial prospective and retrospective assessments of hedge effectiveness; [redacted]

Response to Comment No. 8

Your comment above refers to the appendices to our letter dated September 19, 2007 which
included (1) a sample hedge strategy document in accordance with which separate hedge
relationships may be conducted, and (2) a sample report that summarizes forecasted
transactions that represent available cash flow hedge capacity. Although the sample
documents are flexible enough to be used for multiple relationships, separate
hedge relationships are maintained for LIBOR-based forecasted transactions with different
terms. [redacted].

We do not believe there are any system integration issues that would prevent the Firm from
determining the sequences of the forecasted hedge transactions. The Firm’s systems track
the specific date that each instrument reprices or matures.

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The types of revenue-related cash flows remaining after less predictable revenue
sources are excluded are cash flows that are deemed “annuity-like” such as asset management
fees and investment banking fees. These cash flows are then further adjusted to [redacted]
of the original forecasted amount to ensure the probability of their occurrence. The
period over which revenues are hedged is limited to a maximum of [redacted]. Thus, the
timing [redacted], currency, and amounts of the hedged cash flows are able to be estimated
with a high degree of accuracy. The hypothetical derivative used by the Firm for
effectiveness testing matches the notional and currency of the forecasted revenue cash flow
and has a maturity that matches the Firm’s SFAS 52 remeasurement date of the revenue,
although the actual cash flow may occur on another date within that same month. The Firm
has prepared an analysis similar to the white paper example prepared by the four largest
accounting firms1proving that this date mismatch (which is a maximum of
[redacted] days) results in de minimis hedge ineffectiveness.

[redacted]

Response to Comment No. 9

[redacted]

Response to Comment No. 10

For the Firm’s layering methodology, please refer to (1) the response to Comment 9 above,
(2) the hedge strategy included as Appendix A in our letter dated September 19, 2007 and
(3) the linkage report attached as Appendix B to this letter.

The 90-day deposit example included in the hedge strategy memo was one example of a type of
hedge that might be employed by the Firm under that hedge strategy document. We describe
below the Firm’s overall approach to cash flow hedging and further explain how hedges under
the hedge strategy document, for which core documentation was provided in Appendix A to our
response dated September 19, 2007, would operate over time.

[redacted]

Response to Comment No. 11

[redacted]