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Breaking Story: Merrill Lynch Buyback

Thursday, 7 Aug 2008 | 10:43 PM ET


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."

Breaking News: MER
Merrill Lynch to buy back auction rate securities from retail clients, with the Fast Money crew.

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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On Aug 7, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (MSFT) (DIS) (COST) (WMT), Adami Owns (AGU) (BTU) (GS) (C) (INTC) (MSFT) (NUE), Finerman's Firm Owns (ANF) Call Spread, Finerman's Firm And Finerman Own (KALU) (C) Leaps, Finerman Owns (GS), Finerman's Firm Owns (JCP) (MSFT), Finerman's Firm Is Short (IYR) (IJR) (SPY) (MDY) (IWM) (COF) (SPG) (KIM) (XLR), Terranova Owns (INTC) (GOOG) (BNI) (XLF) (IYT) (YHOO) (VLO) (RIMM) (SA) (SU) (KOL) (CME) (FCX), Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd. Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO, Phoenix Investment Partners Owns More Than 1% Of (ABD) (ARE) (BRE) (CNTY) (CLB) (OFC) (DLR) (ESS) (EXR) (FL) (IAT) (IGE) (LNET) (MAC) (OIIM) (PSPT) (DBC) (DBV) (SLB) (SKT) (BLV), Phoenix Diversifier PHOLIO Owns (IGE) (DBC) (DBV), Sandler O'Neill Advised Clients In Deals Involving (BAC) (JPM), Sandler O'Neill Recvd. Inv. Bank. Comp. From (BAC) (C) In Past 12 Mos, Sandler O'Neill Expects To Receive or Seek Inv. Bank. Comp. From (BAC) (JPM) (C) In Next 3 Mos. (BAC) (C) (JPM) (MER), (MS) Are Clients Of Sandler O'Neill. Sandler O'Neill Was A Manager Or Co-Manager Of A Public Offering for (C) In Past 12 Mos. Sandler O'Neill Has Received Non-Inv. Bank. Comp. From (C) (JPM) (MER) (LEH) (BAC), (GS) Is A Non-Inv. Bank. Client Of Sandler O'Neill, Harte has disclosed for (BAC) (C) (GS) (JPM) (LEH) (MER) (MS), Jon Najarian Is Long (COF) Put Spreads, Jon Najarian Is Long (MRVL) Call Spreads, Jon Najarian Has No Position In (VIX)

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