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CORRESP
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CORRESP

Confidential Treatment

Requested by JPMorgan Chase & Co.

Page 1

May 5, 2008

Ms. Kathryn McHale, Staff Attorney

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, 2008

File No. 001-05805

Dear Ms. McHale:

     JPMorgan Chase & Co. (the “Firm”) hereby submits this letter to respond to comments of the
Staff of the Securities and Exchange Commission contained in your letter dated April 9, 2009
addressed to Michael J. Cavanagh, Chief Financial Officer.

     Certain confidential portions of this letter were omitted by means of redacting a portion of
the text. The word “[Redacted]” has been inserted in place of the portions so omitted. Pursuant to
the provisions of 17 C.F.R. §200.83, the Firm has separately submitted a copy of this letter containing
the redacted portions of this letter with the Securities and Exchange Commission and has requested
confidential treatment for the redacted portions of this letter.

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

Form 10-K for the Fiscal Year Ended December 31, 2008

Item 8 — Financial Statements and Supplementary Data

Notes to consolidated financial statements

Note 2 — Business changes and developments, page 123

    1.

    We note your disclosure on page 125 that in June 2008 the Federal Reserve Bank of New
York (the “FRBNY”) took control, through a limited liability company (the “LLC”) of a
portfolio of $30 billion in assets acquired from Bear Stearns and that you bear the first
$1.15 billion of any losses of the portfolio. We also note your
disclosure on page 139 of your June 30, 2008 Form 10-Q that JPMorgan Chase incurred a net
loss of $540 million (after tax) during the quarter ended June 30, 2008 related to the
acquisition of Bear Stearns. Please confirm whether this loss represented your share of
losses in the LLC based on your first loss position. In addition, please tell us the amount
of losses incurred through December 31, 2008

Confidential Treatment

Requested by JPMorgan Chase & Co.

Page 2

    and consider providing disclosure similar to
that provided on page 139 of your June 30, 2008 Form 10-Q in all future filings beginning
with your March 31, 2009 Form 10-Q.

    The $540 million net loss (after tax) during the quarter ended June 30, 2008 that is
disclosed on page 139 of the JPMorgan Chase June 30, 2008 Form 10-Q represents
merger-related items (including losses incurred on the Firm’s equity method investment in
Bear Stearns between April 8th and May 30th, the date the merger was completed) and merger
expenses. Such amount does not include gains or losses related to the operations of Bear
Stearns subsequent to completion of its acquisition on May 30. Such amount also does not
include amounts recorded in respect of JPMorgan Chase’s subordinated loan in the FRBNY LLC
(the “LLC”).

    At the date of the merger, the estimated fair value of the subordinated loan was [Redacted].
The loan is carried at fair value under SFAS No. 159 and is reported in Loans on the Firm’s
Consolidated Balance Sheet at December 31, 2008. Changes in the fair value of the loan have
been recorded through earnings and are reflected in Principal transactions on the
consolidated statements of income [Redacted].

    The valuation of the subordinated loan is based on a Monte Carlo model that projects
multiple paths of expected cash flows for the financial instruments held by the LLC,
allocates the cash flows according to the priority of payments established at the formation
of the entity, weighs the probability of the cash flows, and discounts the cash flows at a
rate reflective of current market conditions. [Redacted]

    We do not believe it necessary to disclose the change in value of the subordinated loan each
quarter for two key reasons: (1) changes in value of the subordinated loan are included in
Principal Transactions and reflected each quarter on the Consolidated Statements of Income,
and such changes in fair value are not a significant driver of the Investment Bank’s
results; and (2) the amount of cash that the Firm will receive upon repayment of its loan
will depend on the value of the asset portfolio and the liquidation strategy directed by the
FRBNY; the loan will be repaid after the FRBNY is repaid in full for its investment. If
there were to be a material loss in the loan at its maturity (which is scheduled for 2018
but could be earlier or later depending on the FRBNY’s liquidation strategy), then
appropriate disclosure will be made at that time. In addition, as to any additional
merger-related items or merger expenses, they will continue to be disclosed in future
filings if material.

    2.

    We note your disclosure on page 123 as it relates to your acquisition of the banking
operations of Washington Mutual Bank that as a result of the refinement of the purchase
price allocation during the fourth quarter of 2008, the initial extraordinary gain of $581
million was increased $1.3 billion to $1.9 billion. Based
on our review of the condensed statement of net assets at the bottom of page 124 and
comparison with a similar statement on page 94 of your Form 10-Q for the quarter ended
September 30, 2008, it appears that a significant portion of the increase resulted from a
change in the value assigned to all other assets. Given the significance of this
adjustment, please provide us with a more robust discussion

Confidential Treatment

Requested by JPMorgan Chase & Co.

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    explaining the significant
changes in your allocation of the purchase price to net assets acquired and underlying
reasons for these changes.

    [Redacted]

Note 16 — Loan securitization, page 168

    3.

    We note your disclosure in footnote (c) on page 172 that in November 2008 you randomly
removed $6.2 billion of credit card loans from a securitization trust previously
established by Washington Mutual and replaced them with $5.8 billion of higher quality
credit card loans from the legacy Chase portfolio. Please provide us with a significantly
enhanced description of this transaction including the following:

    •

    The business purpose of the transaction. For example, tell us what would have
occurred if you had not removed the existing credit card loans and transferred the
credit card loans from the Chase portfolio to the Washington Mutual trust;

    •

    The party initiating the transaction. For example, tell us whether the request was
made by the other certificate holders to the Washington Mutual trust, due to your
contractual obligation to take the action, or the Company’s voluntarily election to do
so at that time;

    •

    How you originally accounted for the acquisition of the seller’s interest in the
Washington Mutual trust;

    •

    The specific terms for removing accounts from the trust and how the removal impacted
the seller’s interest;

    •

    How you determined the removal of the credit card loans from the trust met the
condition(s) described in paragraphs 9(b), 9(c) and 87 of SFAS 140;

    •

    In more detail, the process for randomly selecting the loans to be removed from the
trust;

    •

    If the random removal of credit card loans from the trust was related to a ROAP
(removal of account provision), whether the exercise of the random ROAP resulted in the
assets acquired having proportionately the same, better or worse quality than the
pro-rate seller’s interest that was previously held;

    •

    How you accounted for the addition of higher credit quality credit card loans from
the legacy Chase portfolio to the Washington Mutual trust; and

    •

    How you accounted for your seller’s interest at December 31, 2008, including where
it is included in your segment disclosures.

    The Firm acquired the seller’s interest in the Washington Mutual Master Trust (the “Trust”)
and became its sponsor in connection with the Firm’s acquisition of the Washington Mutual
banking operations effective September 25, 2008. At that time, the assets of the Trust were
entirely comprised of subprime credit card receivables.
Accordingly, the quality of these assets was much lower than the quality of the credit card
receivables that JPMorgan Chase has historically securitized in the public markets.
Therefore, in order to more closely conform the overall quality of the Trust assets to the
quality typical of a JPMorgan Chase-sponsored credit card securitization Trust, the Firm
randomly removed accounts from the Trust and replaced them with higher-quality

Confidential Treatment

Requested by JPMorgan Chase & Co.

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    accounts from
the Firm’s portfolio. At the time of the action, the excess spread in the Trust was
positive. The Firm believed there was no imminent event — such as an “early
amortization"—that would have occurred had these actions not been taken at that time.
Management decided to take the actions voluntarily and primarily for the purpose of
repositioning the assets of the Trust to be more in line with the quality of previous
JPMorgan Chase-sponsored transactions.

    As described in the preceding paragraph, JPMorgan Chase voluntarily elected to randomly
remove accounts from the Trust (as allowed by, and in accordance with, the Trust’s pooling
and servicing agreement).

    JPMorgan Chase accounted for its initial acquisition of the seller’s interest in the Trust
as an acquisition of loans under SFAS No. 141, Business Combinations, and SAB No. 61, Loan
Losses. Specifically, on the date of the acquisition, the Firm’s beneficial interest in the
Trust’s credit card receivables was recorded at the present value of expected amounts to be
received determined at appropriate current interest rates, and the related allowance for
loan losses was carried over from WMB. JPMorgan Chase then applied its methodology for
calculating the allowance for loan losses to this acquired seller’s interest. Applying the
JPMorgan Chase methodology resulted in the need to increase the allowance for loan losses;
the increase was recorded in the Firm’s Provision for credit losses as an accounting
conformity adjustment.

    The pooling and servicing agreement between the seller and the Trust provides for removal of
accounts by the seller upon satisfaction of certain conditions, including: 1) providing
timely written notice of the planned removal to certain parties, including the trustee, the
servicer and each rating agency; 2) obtaining written confirmation from each rating agency
that the removal will not result in a reduction or withdrawal of the rating for any
outstanding series or class of securities; 3) providing certain representations and
warranties regarding the list of removed accounts; and 4) providing an officer’s certificate
to the trustee specifying that the removal will not cause a pay out event to occur with
respect to any series and that no selection procedure was utilized which would cause the
selection of the removed accounts to be materially adverse to the investors. The pooling
and servicing agreement further provides that: 1) no more than one removal can occur during
any monthly period; 2) the accounts to be removed must be selected at random; and 3) the
aggregate principal balance of the removed accounts as of the date the rating agencies and
trustee were notified of the account removal cannot result in the Firm’s seller’s interest
falling below the minimum seller’s interest required to be maintained by the Trust documents
(which is 5%). Prior to the removal of the accounts, the seller’s interest was
approximately $6.8 billion, or approximately 38%. With the removal of approximately $6.0
billion aggregate principal balance of accounts (the $6.2 billion disclosed by the Firm
included accrued interest), the seller’s interest was reduced to approximately $.7 billion,
which was slightly in excess of the 5% minimum seller’s interest required to be maintained
for the Trust. After the subsequent addition of the
receivables (immediately following the removal of accounts), which is further discussed
below, the seller’s interest represented approximately 36% of the Trust.

    Taking actions in conformity with the removal of accounts provision (ROAP) did not require
any amendments or modification of the pooling and servicing agreement or the

Confidential Treatment

Requested by JPMorgan Chase & Co.

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    Trust
documentation. SFAS 140 states that removal of accounts provisions that provide for random
removals of excess assets do not preclude sales accounting if such ROAP is sufficiently
limited so that the transferor cannot remove specific transferred assets. The removal of
account provisions specified in the pooling and servicing agreement limits any random
removal of accounts up to the amount required to maintain the minimum seller’s interest with
only one such removal during a monthly period. Given the low-balance homogenous nature of
credit card receivables, the limitations specified in the pooling and servicing agreement as
described above, and the random removal process (as described below), the Firm concluded
that the random removal effected during the fourth quarter was sufficiently limited that the
Firm could not effectively remove specific assets from the Trust, thereby satisfying the
conditions described in paragraphs 9(b), 9(c), 54 and 87 of SFAS 140.

    The following describes the process utilized for randomly selecting the accounts for removal
from the Trust:

    •

    Card data for all Trust accounts, including the card number (account number) for
each account, was compiled.

    •

    For each card number, a random number was assigned to it using an automated
random number generator.

    •

    The random numbers associated with the card numbers were then ordered in
ascending order and selected for inclusion in the account removal population up to
the point that the population’s aggregate current balance dollar amount was equal
to or slightly greater than the targeted dollar amount of the account removal. The
targeted dollar amount was set slightly below the maximum amount allowed for
removal under the Trust documents as described above.

    •

    A test was then performed to compare the account removal population to the total
Trust account population to determine that it was not significantly different, at a
99.9% confidence level, with regard to three metrics: average account balance,
average credit limit, and average age.

    Based on the results of the process described above, the Firm believes that the random
removal of accounts from the Trust resulted in the assets acquired by the Firm having
proportionately the same credit quality as that of the seller’s interest that was previously
held.

    The addition of higher credit quality credit card loans from the JPMorgan Chase portfolio to
the Trust, which was a permitted action under the pooling and servicing agreement, resulted
in a recharacterization of the loans to seller’s interest. The Firm transferred $5.8
billion of assets ($5.5 billion par amount of principal receivables plus $.3 billion of
accrued interest) to the Trust and, as a result, no longer had rights to the specific Chase
receivables but instead received an increased undivided interest in a proportionate
amount of the total assets of the Trust. Repayment of the seller’s interest is dependent on
the cash flows of all of the receivables in the Trust. The Firm accounted for its seller’s
interest in the Trust consistent with its accounting for other seller’s interest — that is,
as Loans on the consolidated balance sheets with an allowance for loan losses estimated in
accordance with the Firm’s allowance methodologies.

Confidential Treatment

Requested by JPMorgan Chase & Co.

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