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Troubled Asset Relief Program (TARP)

October 31, 2008
Brian Battle

As most of you know, we had our “Credit Summit” here in Chicago this week. Response was great on fairly short notice with 115 customers and more than 100 financial institutions represented. Lack of capital and liquidity are the fundamental causes of the banking problems we are seeing today. These were the main topics addressed at the summit. Former FDIC Chairman Donald Powell gave a very well‐received presentation and began his comments with the phrase: “Capital is king.” We agree. In fact, Michael Iannaccone and I spoke on day one of the seminar specifically about TARP and how to take advantage of it. Many of you mayhave also seen Rich on CNBC discussing TARP.

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Buy General Market Municipal Bonds II

October 23, 2008
Brian Battle, Rob Livingston

This “Call to Action” is a result of the disorganization in world credit markets. As participants unwind their positions, we now see historically wide spreads on taxexempt municipal bonds and a disconnect of normal pricing between General Markets, Bank Qualifieds, and Treasuries. The current state of these three separate, but related, markets allow us to now buy general market munis at unprecedented levels. We saw this opportunity once earlier in the year and it only lasted a couple of days.

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Call To Action: Buy General Market Municipal Bonds

October 22, 2008
Brian Battle, Rob Livingston

Editors note: This is the second time in 2008 that we have seen longer General Market municipal bonds dislocate from BQ’s and treasuries. In March, the yields/prices reverted back to a norm in 2‐3 days. This time (starting yesterday afternoon and into today) we have seen another significant reversion in the basis bringing the yields/prices back to “more appropriate levels.” While we regret not being able to get a written response out more quickly, we feel it necessary to share our thoughts on this trade so that more of you can participate the next time this type of dislocation occurs (and in this market...it could be tomorrow). More in‐depth analysis will follow in part II of this article.

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Fair Value Update II

October 8, 2008
The Disciplined Investor®

As you know, we have been closely following the FASB application guidance on fair value measurements in an inactive market. James Lorentsen, our Chief Financial Officer, has written an extensive DI on OTTI and last week wrote an update about the fair value issue based on a joint statement from the SEC and FASB.

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Fair Value Update

October 2, 2008
James V. Lorentsen

On Tuesday, just in‐time for quarter end pricing, the FASB and SEC issued a joint statement designed to clarify fair value measurements in the current market environment. The statement was issued to provide immediate clarification on the issues while the FASB is preparing additional interpretative guidance. The key issue centers on how to measure fair value in the current market within the framework of SFAS 157. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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