Merrill to buy First Franklin for $1.3 million

Merrill Lynch's bid to purchase First Franklin, a subprime mortgage lender, from National City Corp. strikes many as a savvy move. Merrill obviously runs an active securitization business and wants more higher-margin products. It is also buying about $5.5 billion in loans that First Franklin originated. Clearly, the terms must have been favorable when considered against demand in secondary markets. Merrill will no doubt be able to make markets in this area and theoretically make money, whether the securitized products rise or fall. I'm betting the spreads are pretty good. But what if liquidity were to dry up? Nah.

For more on the Merrill deal:
- Here's a MarketWatch article