I wonder what the knock on effect will be for the balance sheet and settlement dept of various financial institutions. Those people who made a bet on, "the Govt will never let Fannie and Freddie fail" will now have a one fun time.
Wonder how these instruments are structured. Indeed, how much of it is still out there...
Interesting...
US move triggers CDS default
By Aline van Duyn in New York
Published: September 8 2008 19:21 | Last updated: September 8 2008 19:21
One of the largest defaults in the history of the $62,000bn credit derivatives market has been triggered by the US government’s seizure of Fannie Mae and Freddie Mac, raising questions about how dealers will unwind billions of dollars worth of contracts.
Although the $1,600bn of debt issued by the troubled mortgage groups is regarded as safe after the US government’s move to take control of the companies, their move into “conservatorship” counts as the equivalent of a bankruptcy in the credit derivatives market.
This triggers a default on credit default swaps – instruments that provide a form of insurance on fixed-income assets. Dealers in the market are now working to settle these contracts...
More here from the FT...
救，就累死一D人；
ReplyDelete唔救，又會累死另外一D人 ...
此之謂：救又死；唔救又死 ...
Captain Silver ... the collapse of silver, oil etc ... do you think it is due to losers (hedge funds?) of this "FFF" (i.e. FNM,FRE&FED) battle need to sell everything on their hand ? .. if so then slump of all markets (stocks, commodities ... ) may be triggered by saving actions of Paulson ...
ReplyDeleteanother unintended consequence by government intervention ...
I don't know...
ReplyDeleteI got a feeling some big precious metal hedge fund might have blown up.
Keep an eye on the news coming few weeks.