FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2013

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

	Level 1		Level 2		Level 3
At March 31, 2013	(dollars in thousands)
Assets:
U.S. Treasury Securities	$	1,645,930	$	-		-
Agency mortgage-backed securities		-		108,256,671		-
Agency debentures		-		3,970,279		-
Investment in affiliates		267,547		-		-
Liabilities:
U.S. Treasury Securities sold, not yet purchased		611,167		-		-
Interest rate swaps		-		2,259,173		-
Other derivative contracts		4,812		-		-
	Level 1		Level 2		Level 3
At December 31, 2012	(dollars in thousands)
Assets:
U.S. Treasury Securities	$	752,076	$	-		-
Agency mortgage-backed securities		-		123,963,207		-
Agency debentures		-		3,009,568		-
Investment in affiliates		234,120		-		-
Other derivative contracts		7,955		1,875		-
Liabilities:
U.S. Treasury Securities sold, not yet purchased		495,437		-		-
Interest rate swaps		-		2,584,907		-

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 March 31, 2013 and December 31, 2012.

		March 31, 2013				December 31, 2012
	Level in Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
		(dollars in thousands)
Financial assets:
Cash and cash equivalents(1)	1	$	1,862,550	$	1,862,550	$	615,789	$	615,789
Reverse repurchase agreements(1)	1		4,933,465		4,933,465		1,811,095		1,811,095
U.S. Treasury Securities(2)	1		1,645,930		1,645,930		752,076		752,076
Securities borrowed(2)	2		2,688,485		2,688,485		2,160,942		2,160,942
Agency mortgage-backed securities	2		108,256,671		108,256,671		123,963,207		123,963,207
Agency debentures	2		3,970,279		3,970,279		3,009,568		3,009,568
Investment in affiliates(2)	1		267,547		267,547		234,120		234,120
Corporate debt(3)	2		66,539		67,130		63,944		64,271
Other derivatives(2)	1,2		-		-		9,830		9,830
Financial liabilities:
U.S. Treasury Securities sold, not yet purchased(2)	1	$	611,167	$	611,167	$	495,437	$	495,437
Repurchase agreements(1)(4)	1,2		100,322,942		100,828,852		102,785,697		103,332,832
Securities loaned(2)	2		2,330,060		2,330,060		1,808,315		1,808,315
Convertible Senior Notes(2)	1		824,902		909,255		825,541		899,192
Interest rate swaps	2		2,259,173		2,259,173		2,584,907		2,584,907
Other derivatives(2)	1,2		4,812		4,812		-		-

(1)   Carrying value approximates fair 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.