Breaking Story: Merrill Lynch Buyback

Melissa Lee reports a breaking story linked to Citi's settlement and buyback of auction rate securities during tonight's "Fast Money." In an after-hours announcement, another Wall Street giant, Merrill Lynch, stated it too would buy back auction rate securities from its retail clients, who currently hold $12B of those questionable securities.

Dylan explains how these securities were marketed as "cash-like" yet paying higher interest than cash. He continues with the warning that anything promising higher interest yields than cash will also have higher risks, despite what traders are told. So, he cautions, "next time somebody shows you with something with a better yield that you think that you're taking no risk, you may want to think two, three, four times about that."

Merrill stated that this settlement would not affect its capital structure or hurt capital ratios, while creating liquidity for over 30,000 clients holding those securities. Macke: "Things are no longer the same from where I'm sitting," with Merrill having to buy back $12B in securities that "they had no interest in owning in the first place."

Joe adds that he thinks John Paulson, the IMF and others' prediction that the final extent of credit loss will reach or even top a trillion dollars is on the mark -- especially as it's halfway there already.

"Another reason for hope," quips Dylan.

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