Offsetting Assets and Liabilities

3 Months Ended

Mar. 31, 2020

Offsetting [Abstract]

Offsetting Assets and Liabilities

Offsetting Assets and Liabilities

Certain of the Company’s repurchase agreement and derivative transactions are governed by underlying agreements that generally provide for a right of setoff in the event of default or in the event of a bankruptcy of either party to the transaction. In the Company’s consolidated balance sheets, all balances associated with repurchase agreements are presented on a gross basis.

The fair value of financial instruments pledged against the Company’s repurchase agreements was $8.8 billion and $11.2 billion at March 31, 2020 and December 31, 2019, respectively. Since January 2017, variation margin payments on the Company’s cleared Swaps have been treated as a legal settlement of the exposure under the Swap contract. Previously such payments were treated as collateral pledged against the exposure under the related Swap contract. The effect of this change is to reduce what would have otherwise been reported as fair value of the Swap. As previously discussed, in response to the turmoil in the financial markets resulting from the COVID-19 pandemic experienced during the three months ended March 31, 2020, the Company unwound all of its Swaps late in the quarter. The fair value of financial instruments pledged against the Company’s Swaps at December 31, 2019 was $2.2 million. In addition, cash that has been pledged as collateral against repurchase agreements and Swaps is reported as Restricted cash on the Company’s consolidated balance sheets. (See Notes 2(f), 5(c) and 6). See Note 6 regarding the Company’s inability to meet its margin requirements at March 31, 2020.