FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2012

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

	Level 1		Level 2		Level 3
At September 30, 2012	(dollars in thousands)
Assets:
U.S. Treasury Securities	$	2,242,039	$	-	$	-
Securities borrowed		-		1,602,692		-
Agency mortgage-backed securities		-		129,597,714		-
Agency debentures		-		2,935,538		-
Investment in affiliates		224,899		-		-
Other derivative contracts		559		-		-
Liabilities:
U.S. Treasury securities sold, not yet purchased		1,418,750		-		-
Interest rate swaps		-		2,926,461		-
Securities loaned		-		1,248,968		-

	Level 1		Level 2		Level 3
At December 31, 2011	(dollars in thousands)
Assets:
U.S. Treasury securities	$	928,547	$	-	$	-
Securities borrowed		-		928,732		-
Agency mortgage-backed securities		-		104,251,055		-
Agency debentures		-		889,580		-
Investments in affiliates		211,970		-		-
Equity securities		3,891		-		-
Other derivative contracts		113		-		-
Liabilities:
U.S. Treasury securities sold, not yet purchased		826,912		-		-
Interest rate swaps		-		2,552,687		-
Securities loaned		-		804,901		-

Schedule of Estimated Fair Value for All Financial Assets and Liabilities

The following table summarizes the estimated fair value for all financial assets and liabilities as of September 30, 2012 and December 31, 2011.

	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(dollars in thousands)
Financial assets:
Cash and cash equivalents(1)	$	2,264,854	$	2,264,854	$	994,198	$	994,198
Reverse repurchase agreements(1)		1,612,384		1,612,384		860,866		860,866
U.S. Treasury Securities(2)		2,242,039		2,242,039		928,547		928,547
Securities borrowed(2)		1,602,692		1,602,692		928,732		928,732
Agency mortgage-backed securities		129,597,714		129,597,714		104,251,055		104,251,055
Agency debentures		2,935,538		2,935,538		889,580		889,580
Investment in affiliates(2)		224,899		224,899		211,970		211,970
Receivable from Prime Broker		3,272		3,272		3,272		3,272
Equity securities(2)		-		-		3,891		3,891
Corporate debt(3)		64,928		66,195		52,073		52,628
Other derivatives(2)		559		559		113		113
Financial liabilities:
U.S. Treasury Securities sold, not yet   purchased(2)	$	1,418,750	$	1,418,750	$	826,912	$	826,912
Repurchase agreements(1)(4)		101,033,146		101,634,836		84,097,885		84,369,817
Securities loaned(2)		1,248,968		1,248,968		804,901		804,901
Convertible Senior Notes(2)		999,749		1,180,525		539,913		685,500
Interest rate swaps		2,926,461		2,926,461		2,552,687		2,552,687

(1) The fair value of repurchase agreements with maturities less than one year  approximates carrying value due to the short-term maturities of these items.

(2) Fair value is determined using end of day quoted prices in active markets.

(3) The carrying value of the corporate debt is based on amortized cost. Estimates of fair value of corporate debt require the use of significant judgments and inputs including, but not limited to, the enterprise value of the borrower (i.e., an estimate of the total fair value of the borrower's debt and equity), the nature and realizable value of any collateral, the borrower’s ability to make payments when due and its earnings history.  Management also considers factors that affect the macro and local economic markets in which the borrower operates. 

(4) The fair value of repurchase agreements with maturities greater than one year are valued as pay fixed versus receive floating interest rate swaps.